Companies and Trade Associations Call for Passage of Swipe Fee Legislation

Nearly 2,000 companies and 270 trade associations have asked Congress to pass the Credit Card Competition Act.

June 12, 2023

WASHINGTON—Close to 2,000 companies and a total of 270 trade associations from across the country have signed letters calling on Congress to pass the Credit Card Competition Act, according to the Merchants Payments Coalition (MPC).

“This legislation has twice as many sponsors as last year and the number of small businesses and trade associations voicing their support is increasing every day,” said Doug Kantor, NACS general counsel and MPC executive committee member. “Momentum is building rapidly, and it’s clear that swipe fee reform is a bipartisan issue that’s about Main Street versus Wall Street, not one party versus the other. These fees impact small businesses and consumers in every state and congressional district in the nation, and these letters are proof that Main Street is calling for relief.”

“This is landmark legislation that would help fix a broken market that has allowed Wall Street megabanks and global card networks to block competition and unfairly profit at the expense of Main Street merchants and American families for far too long,” the trade associations said in a letter sent to all members of Congress last week. “Passing this bill is one of the most important things Congress can do to provide relief for small businesses and consumers struggling amid near-record inflation.”

A separate letter sent to Congress by 1,980 individual merchant companies said Visa and Mastercard’s control of more than 80% of the U.S. credit card market means “they do not have to compete with any other service provider for merchant business” and that they “bar their competitors from even having a shot at business with banks that issue their cards.”

“The Credit Card Competition Act would bring much-needed relief to retailers and American consumers by simply requiring that Visa and Mastercard compete with other networks for both merchants and bank business,” the companies said.

The letters were sent after the Credit Card Competition Act was reintroduced last week by Senators Richard Durbin, D-Ill., Roger Marshall, R-Kan., Peter Welch, D-Vt. and J.D. Vance, R-Ohio and by Representatives Lance Gooden, R-Texas, Zoe Lofgren, D-Calif., Thomas Tiffany, R-Wisc. and Jefferson Van Drew, R-N.J.

The eight sponsors are twice as many from when Durbin and Marshall first unveiled the measure last July, and an identical bill was introduced in the House in September by Gooden and Welch before Welch was elected to the Senate.

The bill would address swipe fees, which average over 2% of the transaction that banks and card networks like Visa and Mastercard charge merchants to process credit card transactions. Credit and debit card swipe fees have doubled over the past decade, soaring by $22 billion in 2022 alone to a record $160.7 billion, and are most merchants’ highest operating cost after labor, driving up consumer prices by an estimated $1,024 a year for the average family. As a percentage of the transaction, credit card swipe fees automatically go up as prices rise, creating a multiplier effect on inflation.

Visa and Mastercard currently price-fix swipe fees charged by banks that issue cards under their brands and block transactions on the cards from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with $100 billion or more in assets to enable cards they issue to be processed over at least two unaffiliated networks—Visa or Mastercard plus a competitor like NYCE, Star or Shazam.

Banks would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $11 billion a year. Consumers would still use the same cards they now use, rewards would not be affected, and community banks and small credit unions would be exempt.

In addition to lowering fees, the bill would improve security. Independent networks have less fraud than Visa and Mastercard’s networks, according to the Federal Reserve, and the bill would bar networks controlled by foreign governments, like China’s UnionPay, from processing American credit cards. Any bank can currently put China’s UnionPay on its credit cards with no legal restrictions, but the bill would close that loophole.

NACS announced its support for the bipartisan legislation last week.

“Our stores compete every day for consumers’ business—as does every other business in the country. In the broken credit card market, no competition means an open invitation for these large multinational corporations to continually increase rates and to only focus on what benefits them, as opposed to the customer,” said NACS President and CEO Henry Armour.

Armour added that credit card swipe fees for the convenience retailing industry have increased a staggering 82% between 2020 and 2022 and now stand at $19.5 billion.

NACS members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS Grassroots Portal.