Merchants Large and Small Ask Congress to Support Credit Card Competition Legislation

Merchants Ask Congress to Support Credit Card Competition Legislation

More than 200 merchant trade associations and close to 1,700 companies ranging from Main Street small businesses to national chains like Walmart and Target, are calling on Congress  to support legislation that would bring more competition to the credit card market.

“This legislation introduced by Senator Durbin and Senator Marshall will bring much-needed competition into the United States credit card market, which has been dominated by only two players for far too long,” the companies said in a letter on Tuesday. “As members of the retail community and champions of the free market, we typically do not support government intervention except in cases where a market is not functioning. That is the case with the credit card marketplace in the United States.”

“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 in every state and congressional district,” the trade associations said in a separate letter today. “While this legislation would benefit all merchants, it is small retailers who are calling for swipe fee reform more than any segment of our industry. Small retailers have the narrowest profit margins and fewest resources and are hit hardest by continuing unjustified increases in swipe fees.” 

The letters were signed by 1,668 companies and 231 trade associations and were sent to all members of the House and Senate by the Merchants Payments Coalition. They asked lawmakers to cosponsor or support the Credit Card Competition Act, which was introduced in July.

The letters cited “swipe” fees averaging over 2 percent 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 more than doubled over the past decade, soaring 25 percent last year alone to a record $137.8 billion. They are most merchants’ highest operating cost after labor and drove up consumer prices by about $900 a year for the average family last year.

When a shopper uses a credit card, the merchant pays a variety of fees, including an interchange fee that is set by the network and collected by the card issuer. Visa and Mastercard, which control more than 80 percent of the credit card market, centrally set the swipe fees charged by banks that issue cards under their brands and those banks do not compete with each other on price. They also restrict processing to their own networks, prohibiting competition from other networks that can offer lower fees and better security and resulting in the highest swipe fees in the industrialized world.

The legislation would require that credit cards issued by the nation’s largest banks be enabled to be processed over at least two unaffiliated networks – Visa or Mastercard plus a network such as NYCE, Star or Shazam. Domestic credit card networks like American Express or Discover could also be the second network, but not networks supported by foreign governments like China’s UnionPay. The banks would decide which two networks to enable on a card and then merchants would be allowed to choose which of the two to use when a transaction is made. That means networks would have to complete to offer the best pricing, security and service.

The bill would apply only to financial institutions with at least $100 billion in assets.