Swipe Fee Legislation Introduced in Congress

Both the Senate and House dropped bills to address swipe fees by bringing competition to a broken market.

June 08, 2023

ALEXANDRIA, Va.—Bipartisan legislation addressing swipe fees was introduced yesterday in both the U.S. Senate and U.S. House of Representatives with the goal of creating choice for retailers when processing credit card purchases. The Credit Card Competition Act seeks to bring competition to the credit card market and addresses the exorbitant swipe fees paid by retailers every year.

News of the impending legislation was shared in a June 7 NACS Government Relations Alert, and the legislation was introduced hours later by Senators Richard Durbin (D-IL), Roger Marshall (R-KS), Peter Welch  (D-VT) and J.D. Vance (R-OH) and House Members Lance Gooden (R-TX), Zoe Lofgren (D-CA), Tom Tiffany (R-WI) and Jeff Van Drew (R-NJ). 

Both bills would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade. The proposed legislation only applies to banks with more than $100 billion in assets, exempting the vast majority of banks and credit unions in the United States, including community banks and other small and mid-sized regional banks.

“As a business owner for more than 40 years in eastern Kansas, my fastest growing operating expense is credit card swipe fees. It’s the only cost I am powerless to negotiate, beholden to whatever Visa and Mastercard set as the fees. That’s why I’m grateful for the leadership of Doc Marshall in standing up for Kansas businesses by introducing the Credit Card Competition Act. This legislation will finally ensure Visa and Mastercard have to compete for my business, just like I have to compete for my customer’s,” said Gratz Peters, president of Pete’s Corp. (dba Pump’n Pete’s), in a statement shared by Sen. Roger “Doc” Marshall.

The legislation proposes an open marketplace for credit card processing in which retailers could choose the payment network to handle a transaction. Currently, networks equipped to route these transactions have been blocked from entering the market by Visa and Mastercard, which dominate the U.S. market and issue 83% of all credit cards. 

The bills also would help lower fees and fraud. According to the Federal Reserve, most competing networks currently shut out by Visa and Mastercard charge lower fees and have less fraud, but consumers are unable to benefit from these options. The legislation also would strengthen security by prohibiting foreign networks like China Union Pay from being a network on credit cards issued in the United States. 

In the United States, banks that issue Visa and Mastercard credit cards charge a swipe fee that averages 2.25% of the purchase price when the cards are processed over Visa or Mastercard’s networks. These rates are the highest in the world, seven times higher than the average rate in Europe.

Credit and debit card swipe fees have more than doubled over the past decade and are now $160.7 billion a year, according to the Nilson Report, which is considered the most trusted source on statistics in the payments industry. These fees cost the average American family more than $1,000 a year.

NACS announced its support for bipartisan legislation yesterday. 

“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.

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.

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.

“Current inflationary prices make the problem of swipe fees even worse. With all of the economic uncertainty Americans face every day, one thing is certain: Swipe fees punish American families more than anyone else. This broken system needs to be fixed now, and we applaud all of the cosponsors of this legislation for standing up for what’s right,” said Armour.