"[T]he market for interchange fees in the United States is broken. Something must be done to fix it."
NACS President and CEO Henry Armour delivered those comments to Congress almost two decades ago before the U.S. House of Representatives Subcommittee on Commerce, Trade and Consumer Protection.
That February 15, 2006, hearing on "The Law and Economics of Interchange Fees" was during the early stages of the convenience retail industry’s fight to reduce swipe fees and bring competition and transparency to the credit card market.
Since then, more than a dozen hearings have been held on swipe fees, a handful championed by U.S. Senate Majority Whip Dick Durbin (D-IL), chairman of the Senate Judiciary Committee.
"I first learned about interchange fees during a Senate Judiciary Committee hearing held in 2006," said Durbin in his opening statement at a November 19, 2024, hearing.
"In the 18 years since that hearing, American consumers have been charged a staggering $1.1 trillion in interchange fees. The vast majority of these fees—a total of $797 billion—come from credit card purchases," he continued.
The 2006 hearing Durbin referred to? It was on credit card interchange rates and antitrust concerns, and then-NACS Chairman Bill Douglass testified on behalf of the convenience store industry.
That 2006 hearing also helped lead to the Durbin Amendment which passed in 2010 and brought regulation to debit card swipe fees. That amendment is estimated to have saved U.S. merchants between $8 and 9 billion per year each year since 2012—with $800 to $900 million of that attributable to the convenience store industry.
Flash forward to 2024, NACS General Counsel Doug Kantor testified on behalf of the c-store industry during the Senate Judiciary Committee’s November 19 hearing, "Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System."
The hearing examined the lack of competition in the credit card market and its impact on swipe fees, as well as legislative solutions like the NACS-supported Credit Card Competition Act.
Kantor highlighted the antitrust issues related to Visa and Mastercard's pricing practices.
"There's an ongoing competition policy problem and a real antitrust problem that is squarely within the jurisdiction of this Committee that affects retailers every single day, and that is that Visa and Mastercard have formed the banks that issue credit cards under their names into pricing cartels," Kantor said.
He continued that both Visa and Mastercard, which had representatives testify during the hearing as well, openly said in their comments that "they don't set the interest rates that the banks charge to consumers, they don't set the fees that banks charge to consumers, they don't issue the cards, yet here they set the price to the merchants. It's the one place where there is no competition across those banks. We need that level of competition."
Those who are also hit hard, said Kantor, are those with the "lowest income and lowest credit score...Federal Reserve economists put out a study a couple years ago: $13 billion gets transferred from low-income, low-credit score individuals to high-income, high-credit score individuals through this system. It's an ongoing problem. And consumers don't know it."
You can listen to Kantor’s full testimony on this Convenience Matters podcast episode, “NACS Calls for Action on Swipe Fees.”
Judiciary Committee members also heard from a small retailer in upstate New York who runs an independent bookstore with his wife.
"In the past, our credit card fees averaged about 2.4% of each credit card transaction. That’s on the total amount of the transaction before I pay my expenses," said Chris Callahan, co-owner of Battenkill Books in Cambridge, New York.
“As a co-owner of the business, I can only take profits out of our net margins after taking out expenses,” he continued, adding, “Essentially, Visa and Mastercard have taken an ownership interest in my bookstore with primacy over my own interest. They are the silent partners that we never asked for or wanted.”