A proposed bill to impose new network routing mandates on banks that issue credit cards would put payments security at risk with no evidence that retailers would pass their cost savings to consumers, representatives from Visa and Mastercard told lawmakers today.
The Senate Judiciary Committee held a hearing on credit interchange card fees and the retailer-backed Credit Card Competition Act, co-sponsored by committee Chair Dick Durbin (D-Ill.) and Sen. Roger Marshall (R-Kan.). Durbin painted his proposed routing mandate as a necessary check on the alleged monopoly that Visa and Mastercard hold on the credit card market, arguing that more competition would lead to lower fees.
“There is a hidden contributor to the high prices we pay on everything, from furniture to eggs — credit card swipe fees,” Durbin said during his opening remarks. “Every time an American consumer makes a purchase using a credit card, a swipe fee is taken out of the transaction amount and divided between the credit card network and the bank that issued the card.”
In her testimony to the committee, Linda Kirkpatrick, president of the Americas for Mastercard, countered that the legislation would impose artificial controls on a system that is working well. She pointed to the previous passage of the Durbin amendment, which capped debit card interchange fees but did not lead to retailers lowering prices.
The Credit Card Competition Act “will remove choice from consumers, erode security, and hurt community institutions and credit unions — the very groups we’re trying to protect,” Kirkpatrick said. “Why do we know this? Because we have seen it before. Since debit regulation took hold, debit rewards were eliminated, fees went up, access to capital diminished and competition was stifled.”
Bill Sheedy, senior advisor to the CEO of Visa, told lawmakers that payments systems are facing growing threats from nation states and criminals seeking to commit fraud. “Government regulation should encourage innovation, security and consumer choice,” he said. “The Credit Card Competition Act, however, would remove consumer control over their own payment decisions, reduce competition and impose technology-sharing mandates and pick winners and losers by favoring certain competitors over others.”
While many committee members pressed Kirkpatrick and Sheedy on their companies’ share of the credit card market and whether that dominance came at the expense of small businesses and consumers, other members, such as Sen. Mazie Hirono (D-Hawaii), were not convinced the legislation would remedy the alleged problem it sought to address.
“The only benefit is if the lower fees somehow result in lower product prices,” Hirono said. “There is absolutely nothing in this bill that would require any kind of pass-through.”
In a letter sent to the committee day before the hearing, the American Bankers Association joined seven banking and credit union associations in warning that the proposed bill would harm small businesses and consumers across the country. They also criticized the committee chair’s decision not to invite testimony from community banks or credit unions harmed by the proposal.
