High swipe fees and lack of competition harm American small businesses and consumers
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today delivered an opening statement during the Senate Judiciary Committee hearing entitled “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.” This hearing will examine interchange fees and other anticompetitive practices in the credit and debit card industries, and how rising interchange fees lead to higher consumer prices for goods and services and add to inflationary pressures.
“Visa and Mastercard control around 80 percent 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. Banks get the fees, but the banks do not set the fees. Instead, the banks let Visa and Mastercard set the fees on their behalf, so the same schedule of fee rates applies for all banks in the network.”
“When Visa and Mastercard raise interchange fees, banks want to issue more cards because they make more on each swipe. And Visa and Mastercard profit when there are more swipes, because they take their own cut, called a network fee, from the merchant on each swipe. But merchants and their customers take it on the chin.”
“Bottom line: when swipe fees go up, it costs more to use money. And that cost gets built into the prices that consumers ultimately pay.”
Video of Durbin’s opening statement is available here.
Audio of Durbin’s opening statement is available here.
Footage of Durbin’s opening statement is available here for TV Stations.
This hearing builds on years of efforts by Durbin to bring fairness, transparency, and competition to credit and debit card interchange, or swipe, fees. Tens of billions of dollars in these swipe fees are charged each year by the dominant card networks Visa and Mastercard, and the fees are structured in a way so they are not 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 debit card interchange fees that are imposed by Visa and Mastercard on retailers and merchants. Since its enactment, the Durbin Amendment has helped achieve billions of dollars in reduced interchange fees for Main Street merchants and their customers.
Yet despite these efforts, last year, U.S. merchants paid out a staggering $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 further increased many of their interchange fee rates despite bipartisan calls from Congress not to do so. This hearing will help shine a light on how removing barriers to credit and debit card competition and curbing excessive swipe fees would lead to more efficient, more secure, and lower cost electronic payment systems.