A bill that would limit Visa and Mastercard's control over swipe fees has been formally introduced in the Senate.
Sens. Dick Durbin, D-Illinois, and Sen. Roger Marshall, R-Kansas, on Thursday introduced The Credit Card Competition Act of 2022, which would require the largest Visa- and Mastercard-issuing banks to add a second payment card routing option to cards to lower merchants’ card-processing costs.
The proposed rule would apply only to banks with more than $100 billion in assets. It comes after
“Credit card swipe fees inflate the prices that consumers pay for groceries and gas. It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly,” Durbin said in a press release Thursday.
News of a potential bill had leaked late Wednesday. During
Only Visa and Mastercard, which are considered “four-party networks” because of their role in acting as intermediaries between consumers’ and merchants’ banks, would be affected by the bill, according to the release.
Banks covered by the proposed bill could offer either Visa or Mastercard as one credit card routing option; the second option could be another payment card network such as American Express or Discover, any debit card network or a fintech company, the release said.
Visa and Mastercard did not offer comment on the bill by deadline.
The proposed bill echoes one aspect of the Durbin amendment to the Dodd-Frank Act of 2010. That rule, which went into effect a decade ago, aimed to expand debit card network competition by requiring banks to offer merchants the choice of two unaffiliated debit card networks on every debit card.
Unlike the earlier Durbin amendment, which set a cap on debit card interchange rates for banks with more than $10 billion in assets, the proposed credit card competition bill doesn’t set any limits on credit card interchange rates.
Merchants pay an average of 2.2% of the purchase amount for every credit card transaction processed over Mastercard and Visa rails, which amounts to billions every year, according to the National Retail Federation.
Citing inflation’s effect on rising payment card pricing, the senator convened a Judiciary Committee hearing to reassess rules that resulted in caps on debit transaction fees 11 years ago.
“Credit card swipe fees have been driving up prices paid by American consumers for decades but are particularly burdensome amid the near-record inflation families face today,” Leon Buck, the federation’s vice president for government relations, said in a press release Thursday.
The banking industry strongly opposes the latest proposed Durbin payment card bill and plans to fight it.
“We are surprised that Senator Marshall would join Senator Durbin in introducing legislation intended to help major retailers pad their profits,” Sarah Grano, a spokesperson for the American Bankers Association, said in a statement.
Despite the bill's focus only on the largest banks, smaller institutions are wary of its effects.
The Durbin amendment that earlier went into effect for debit cards "has shown that these price controls will negatively impact all institutions," Greg Mesack, senior vice president of the National Association of Federally Insured Credit Unions, said in a statement on Thursday.
The Federal Reserve would have a year to develop implementation rules after its enactment and the bill would go into effect 180 days after its finalization.
