Merchants Urge Lawmakers to Support Credit Card Competition Bill

WASHINGTON, D.C. — Small businesses and national retail chains joined together to ask federal legislators to support legislation directed at bringing competition to the credit card market.

In July, Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) introduced the Credit Card Competition Act, which seeks to bring long-overdue competition to the market and addresses the estimated more than $138 billion in swipe fees imposed on U.S. retailers.

This week, more than 200 merchant trade associations and close to 1,700 companies ranging from Main Street small businesses to national chains called on Congress get behind the proposal.

"This legislation introduced by Sen. Durbin and Sen. 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."

Trade associations sent a separate letter on the issue.

"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. "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. They were sent to all members of the U.S. House of Representatives and U.S. Senate by the Merchants Payments Coalition (MPC). Both asked lawmakers to cosponsor or support S. 4674, the Credit Card Competition Act. Signers include retailers, grocers, convenience stores, gas stations, restaurants, hotels and a variety of other merchants of all sizes along with associations representing the same sectors.

According to the MPC, the letters cited swipe fees averaging more than 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, increasing 25 percent in 2021 to a record $137.8 billion.

The fees are most merchants' highest operating cost after labor and drove up consumer prices by about $900 a year for the average family last year.

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, MPC explained.

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 coalition added.

The proposed 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, according to MPC.

The bill would apply only to financial institutions with at least $100 billion in assets — about 30 of the nation's largest banks and just one credit union but 90 percent of Visa and Mastercard credit card volume — and would have no impact on community banks or small credit unions.