A bipartisan bill aimed at increasing competition in the Visa- and Mastercard-dominated credit card processing network is gaining momentum in Washington as companies take sides on whether it will ultimately help cut consumer and merchant costs.
The bill, the Credit Card Competition Act, seeks to increase industry competition by requiring credit card-issuing banks with assets over $100 billion to add a second credit card network to their platforms. The bill builds on debit card competition reforms enacted by Congress in 2010.
“American consumers are worried about inflation and rising prices, and credit card swipe fees are part of the problem,” Sen. Dick Durbin (D-IL) said last month in introducing the bill, which has companion legislation in the House. Visa and Mastercard hold a “duopoly,” controlling more than 80% of the U.S. credit card network market, or more than 576 million cards, he said.
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Each time one of their cards is swiped, about 2% to 3% is deducted from the transaction amount that the merchant receives. Visa and Mastercard retain some of that cut for themselves as a network fee that is passed on to consumers in the form of higher prices for gas, groceries and more, Durbin said.
Banks reject proposal
Groups opposing the bill include the Electronic Payments Coalition (EPC), whose members include credit unions, community banks and institutions. The group told Kiplinger in a recent statement that the bill would result in harmful credit card routing mandates.
“This legislation would allow big-box retailers like Walmart and Target to process credit card transactions based solely on what is cheapest for them without regard to the value that consumers derive from rewards and many other benefits,” the EPC said. “This ‘Big-Box Bill’ is a multibillion-dollar corporate welfare scheme for mega-retailers that will eliminate funding for popular credit cards rewards programs, weaken cybersecurity protections, and reduce access to credit for those who need it the most.”
The group points to the 2010 debit card reforms, which it called “a disaster” for consumers and small financial institutions.
“If Walmart, Target, and other big-box retailers can get Congress to pass this legislation, it will undermine fraud security and hurt consumers, small businesses, and community banks. Congress should avoid repeating history and instead work to stop routing mandates from expanding to credit cards,” EPC added.
Amazon referred Kiplinger’s request for comment to the website of Merchants Payments Coalition (MPC), a trade group that includes retailers, supermarkets, restaurants, drug stores, gas stations and online merchants.
In a letter sent to Congress, the MPC said the legislation 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 Credit Card Competition Act is sponsored in the Senate by Durbin with co-sponsors Roger Marshall (R-KS) , Peter Welch (D-VT) and J.D. Vance (R-OH). In the House, the bill is sponsored by Lance Gooden (R-TX), Tom Tiffany (R-WI), Jefferson Van Drew (R-NJ) and Zoe Lofgren (D-CA).
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