Retailer Groups Urge Senate to Change 'Anticompetitive' Swipe Fee System

Citing data released by payments consulting firm CMSPI, RILA noted that swipe fees to process credit and debit card transactions reached $224 billion in 2023 and stated that its members believe the the Senate Judiciary Committee must protect consumers by ensuring competition exists throughout the payments arena.

Growing credit card swipe fees that are driving up costs for retailers and prices for consumers could be reined in by passage of the Credit Card Competition Act (CCCA), stated National Retail Federation (NRF) in a letter sent to the committee ahead of the hearing.

"Arbitrarily high swipe fees are adding inflationary pressure to the U.S. economy and prevent retailers and other merchants from growing their businesses," NRF Senior Vice President for Government Relations David French wrote. "The Credit Card Competition Act provides a bipartisan, common-sense solution that would finally bring competition to the credit card routing market" while delivering "fairness and transparency to the payments system and relief to American businesses and consumers," he said.

According to French, because Visa and Mastercard control more than 80% of the U.S. credit card market and each centrally set swipe fee rates charged by all banks that issue their cards, every U.S. business that accepts credit cards is forced to pay excessively high payments fees imposed on a "take-it-or-leave-it" basis.

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"The current credit card system has been designed by the Visa-Mastercard duopoly to maximize profits for the networks and the nation's largest credit card issuers while forcing merchants and their customers to pay excessive fees without any recourse to help bring these costs under control," French said. "This market failure requires action by Congress."

Hearing Testimony

During the hearing, the Merchants Payments Coalition (MPC) testified before the Senate Judiciary Committee that rising credit card swipe fees cost small businesses and their customers billions of dollars each year, and joined the NRF in calling for the passage of the CCCA.

"Most consumers are not aware of these fees or the effect they have on the cost of goods and services and the U.S. economy, but the effects are dramatic," MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. "For merchants, these excessive and ever-increasing fees are a constant source of stress and financial difficulty, and for consumers they contribute significantly to inflation. In fact, swipe fees reduce efficiency across the economy.

"It does not have to be this way," Kantor continued, adding that the Credit Card Competition Act would introduce market competition where none currently exists by creating incentives for innovation on price and service that would benefit both consumers and the economy. "Swipe fees desperately need those incentives but lack them today. The CCCA would deliver on that."

Kantor appeared at the hearing on behalf of MPC and NACS. He told the committee that because Visa and Mastercard require merchants who accept any of their cards to accept all their cards, they remove "almost all bargaining power" merchants might otherwise have to negotiate with banks.

Complex card industry rules keep the true cost of credit card swipe fees under "a veil of secrecy," not appearing on receipts or monthly bills, according to Kantor.

"The problems caused by all of this for consumers, merchants and the economy are immense," he said.

The hearing was held by Senate Judiciary Committee Chairman Richard Durbin (D-Ill.), one of the lead sponsors of the CCCA along with Sen. Roger Marshall (R-Kan.).