High swipe fees and lack of competition are hurting small businesses and US consumers
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), chairman of the Senate Judiciary Committee, today delivered an opening statement during the Senate Judiciary Committee hearing entitled “Sweeping Fees and barriers to competition in credit and debit card systems”. This hearing will examine interchange fees and other anti-competitive practices in the credit and debit card industries, and how rising interchange fees drive up consumer prices for goods and services and increase inflationary pressures. .
“Visa and Mastercard control about 80% of the credit and debit card market. And they have established a system of fees and rules that apply to every transaction involving cards issued by the thousands of banks in the Visa and Mastercard networks.
“Interchange fees are designed to avoid competitive market pressures. The banks collect the fees, but they do not set the fees. Instead, banks let Visa and Mastercard set fees on their behalf, so the same fee rate schedule applies to all banks in the network.
“When Visa and Mastercard increase interchange fees, banks want to issue more cards because they earn more with every swipe. And Visa and Mastercard profit when there are more swipes because they take their own share, called network fees, from the merchant with every swipe. But merchants and their customers take it on the chin.
“The bottom line: When swipe fees increase, it costs more to use money. And that cost is built into the prices consumers ultimately pay.
Video of Durbin’s opening statement is available here.
Audio of Durbin’s opening statement is available here.
Images of Durbin’s opening statement are available here for TV channels.
This hearing builds on years of Durbin’s efforts to bring fairness, transparency and competition to credit and debit card interchange or swipe fees. Tens of billions of dollars in swipe fees are charged each year by the dominant card networks Visa and Mastercard, and fees are structured so as not to be subject to competitive market pressures. The 2010 “Durbin Amendment” to the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Federal Reserve to impose reasonable limits on the debit card interchange fees charged by Visa and Mastercard to retailers and merchants. Since its enactment, the Durbin Amendment has resulted in billions of dollars in reduced interchange fees for Main Street merchants and their customers.
Yet despite these efforts, last year US merchants paid $77.48 billion in credit card fees and $28.06 billion in debit card fees imposed by Visa and Mastercard. And just two weeks ago, Visa and Mastercard again increased many of their interchange fee rates despite bipartisan calls from Congress not to do so. This hearing will help shed light on how removing barriers to credit and debit card competition and reducing excessive swipe fees would lead to more efficient, secure and less expensive electronic payment systems.