When the Credit Card Competition Act was first introduced in Congress last summer to address soaring credit card “swipe” fees that drive up prices for consumers, there were only two sponsors, Sens. Richard Durbin, D-Ill., and Roger Marshall, R-Kan. Last fall, two more joined in, Reps. Peter Welch, D-Vt. (now a senator) and Lance Gooden, R-Texas.But when the measure was reintroduced this summer, there were eight sponsors: those four plus Sen. J.D. Vance, R-Ohio, and Reps. Zoe Lofgren, D-Calif., Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.That’s twice as many sponsors as last year and a clear sign of the rapidly growing support across the political spectrum for this pro-Main Street, pro-consumer legislation.In addition, nearly 2,000 merchant companies have signed a letter calling for Congress to pass the bill, up from nearly 1,700 when a similar letter was sent last fall. And 270 trade associations from every state plus Puerto Rico – including the Missouri Grocers Association, Missouri Petroleum and Convenience Stores Association, Missouri Restaurant Association, Missouri Retailers Association and Missouri Tire Industry Association – signed a letter of their own, up from 236.Support is growing because swipe fees are growing worse. Giant card networks like Visa and Mastercard and big card-issuing banks like JPMorgan Chase take 2-4% of the transaction from the merchant each time a credit card is used, and those fees add up quickly. Credit and debit card swipe fees have more than doubled over the past decade and soared $22 billion last year alone to a record $160.7 billion, according to the Nilson Report.As most merchants’ highest cost after labor, swipe fees are too much to absorb, especially for small businesses, and drive up prices paid by consumers. These fees cost the average family over $1,000 in higher prices last year, up from $900 the year before, according to the Merchants Payments Coalition.Lack of competition is the problem. Visa and Mastercard control 80% of the market and centrally price fix the swipe fees charged by all of the banks that issue credit cards under their brands. They also restrict processing to their own networks even though there are others that could do the job for less and with better security.The Credit Card Competition Act would require that the nation’s largest banks enable credit cards they issue to be routed over at least two unaffiliated networks for processing – Visa or Mastercard plus a competitor such as NYCE, Star or Shazam. Banks would choose which networks to enable but merchants would choose which to use for each transaction. That would make networks compete over fees, security and service, saving merchants and consumers an estimated $15 billion a year, according to payment consulting firm CMSPI. Like other figures, that savings is up from the $11 billion projected last year as swipe fees have continued to rise.Despite misinformation from the card industry, credit card rewards would not be affected because rewards are determined by the banks that issue cards, not the networks that process transactions. Security would increase because the Federal Reserve says independent networks have one-fifth the fraud of Visa and Mastercard’s networks, and networks controlled by foreign governments like China UnionPay would be prohibited from processing U.S. cards. Community banks and small credit unions would be exempt because the legislation applies only to financial institutions with at least $100 billion in assets – not a single Missouri-based bank or credit union is that large. And nothing would change about which cards consumers use or how they use them.While these fees affect all merchants, it is small businesses who need relief the most. Small retailers pay the highest rates, don’t have an army of lawyers to decipher cryptic contracts and have no leverage to negotiate at all.While it’s good to have eight sponsors on the bill this year, there are two who are missing. Missouri merchants want Senators Josh Hawley and Eric Schmitt to stand up for small businesses and consumers by joining their colleagues in neighboring Kansas and Illinois as sponsors of this landmark legislation. Global credit card networks and Wall Street banks have profited on the backs of Missouri small businesses and shoppers for far too long.
David Overfelt is president of the Missouri Retailers Association
