May 04, 2022

Durbin Questions Visa and Mastercard Witnesses at Hearing on Credit and Debit Card Swipe Fees

WASHINGTON – During today’s Senate Judiciary Committee hearing entitled “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems,” U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, asked Bill Sheedy, Senior Advisor to the Chairman and CEO of Visa Inc., about a statement on a January earnings call by Visa Chief Financial Officer Visant Prabhu, that Visa benefitted from inflation. 

“On a January 27th earnings call, [Visa CFO Visant Prabhu] was asked how inflation impacts Visa.  His answer, and I quote, ‘net-net, I mean we are a beneficiary of inflation.’ He also said, quote, ‘to the extent that there's inflation, driving up ticket size, clearly, it's beneficial to us.’  So let’s put to rest the theory this has nothing to do with inflation,” Durbin said.

Durbin then asked Linda Kirkpatrick, President of Mastercard in North America, about Interac, Canada’s largest debit card system.

“Ms. Kirkpatrick, you’re in charge of Mastercard North America. I want to ask you about these crazy Canadians… In Canada there’s a debit card system called Interac.  It is the most widely used debit card system in Canada.  It reports it has one of the lowest rates of fraud globally.  The website for Interac says, ‘Interchange for Interac debit is currently set at zero.’  How is it possible these crazy Canadians are getting no charge for interchange fees on debits and have less fraud?  How can that possibly be?” Durbin asked.

Ms. Kirkpatrick answered that there is value in the debit space that consumers derive from transacting at merchants. Durbin then asked Ed Mierzwinski, Senior Director of Federal Consumer Program at U.S. PIRG, about interchange fees in Europe and other countries. The European Union limits debit and credit card interchange fees to 0.2% and 0.3% respectively, which is about one-eighth of the fee rates that Visa and Mastercard set in the U.S.

“What lessons can we learn from these countries who decided that interchange fees are way too high in the United States?” Durbin asked.

Mierzwinski stated that those other countries recognize the credit card system is a market failure. He also said the United States Congress should strengthen the “Durbin Amendment,” expand it to credit cards, and lower interchange fees across the board. The 2010 “Durbin Amendment” to the Dodd-Frank Wall Street Reform and Consumer Protection Act placed reasonable limits on Visa and Mastercard’s interchange fee-setting and required competitive options to be available for each debit card swipe.  Since its enactment, the Durbin Amendment has helped achieve billions of dollars in reduced interchange fees for Main Street merchants and their customers.

Durbin also asked Ms. Kirkpatrick of Mastercard about interchange fees charged on the sales tax portion of transactions.

“And the interchange fees also apply to sales tax I’m paying on my restaurant bill?” Durbin asked

Ms. Kirkpatrick replied, “It does.”

“A tax on a tax,” Durbin said.

Video of Durbin’s questions in Committee is available here.

Audio of Durbin’s questions in Committee is available here.

Footage of Durbin’s questions in Committee is available here for TV Stations.

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 two weeks ago, Visa and Mastercard further increased many of their interchange fee rates despite bipartisan calls from Congress not to do so. 

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