Senate Legislation Aims to Reduce Credit-Card Swipe Fees

The bill, expected to be introduced as soon as today, would increase competition among U.S. credit-card networks.

July 28, 2022

Credit Card Chip Reading

ALEXANDRIA, Va.—A bill that aims to create more competition among the U.S. credit-card networks and address swipe fees could be introduced as early as today, reports the Wall Street Journal. Two U.S. senators, Sen. Dick Durbin (D-IL) and Sen. Roger Marshall (R-KS), are prepping legislation that would give merchants the ability to process Visa and Mastercard transactions over different networks.

Marshall said that although banks and major credit-card networks lobbied him to not move forward with the legislation, he decided to continue after hearing from multiple merchants, including NACS, about the toll swipe fees have on retailers.

Swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. In 2021, overall card fees paid by the convenience store industry were $13.5 billion, up 25.6% in 2021 versus 2020 ($10.7 billion), NACS SOI data indicate.

The bill would mandate that merchants have the right to route payments through an unaffiliated network, and this mandate would apply to Visa or Mastercard credit cards that are issued by banks with more than $100 billion in assets.

The Merchants Payments Coalition, of which NACS is a founding member, said that merchants should have the choice to send credit-card payments over networks that set lower fees.

The Journal reports that because the bill would amend the Electronic Fund Transfer Act, the legislation would likely be referred to the Senate Banking Committee, and neither Sen. Durbin nor Sen. Marshall sit on the committee.

House Rep. Peter Welch (D-VT) plans to be the lead Democrat on the House version of the bill, and it has not been determined if there will be a Republican co-lead on the bill and if it would be introduced without one.

Sen. Dick Durbin and Sen. Roger Marshall, Rep. Peter Welch and Rep. Beth Van Duyne, (R-TX) wrote to Visa and Mastercard in April asking the card companies to withdraw their planned rate hike. The lawmakers said the increase would add to inflationary pressure and is the “last thing American families deserve right now.” The credit-card companies ultimately moved forward with their planned rate hike.

In May, NACS Kantor testified at a Senate Judiciary Committee on behalf of the convenience store industry and the Merchants Payments Coalition. In his opening statement, Kantor described the antitrust issues borne from Visa and Mastercard’s dominance of the credit card market.

“This is an incredibly concentrated market, and none of [the banks] are setting their own prices. That doesn’t make any sense,” stated Kantor. “On top of that, Visa and Mastercard set the terms by which cards are accepted, which make sure to insulate those fees from any other competitive market pressure to make sure they can stay high.”

At an average of 2.22% of the transaction amount, Visa and Mastercard’s U.S. credit card swipe fees are the highest in the industrialized world. Swipe fees are most merchants’ highest operating cost after labor and drive up consumer prices, amounting to more than $900 a year for the average American family.