Democratic Sen. Dick Durbin finally found a Republican partner to join him in taking on the nation’s big card network companies, Visa and Mastercard.
Durbin (D-IL) joined with Sen. Roger Marshall (R-KS) last month to introduce the Credit Card Competition Act of 2022, which would require credit card networks other than Visa, the largest network, and no. 2 Mastercard, be available to merchants for routing such transactions.
Industry players involved in the years-long war over credit and debit card fees say there could be $100 billion at stake this time around as banks and credit unions try to hang onto more fees from credit routing, and as retailers and merchants fight to lower those fees.
Durbin and Marshall now have to win over their colleagues to get the bill passed, which won’t be easy. Despite optimism by some advocates that the legislation will have bipartisan appeal, it seems the same old battle lines are being drawn by trade groups and gathering support from both sides of the aisle is unlikely to be easy.
The bill cheers large retailers, who have sought to encourage the growth of rival, lower-cost networks. But the legislation irks the credit card duopoly and their card-issuing allies because they all profit from the fees.
Big card issuers have already characterized the bill as unnecessary interference in their business, despite the caveat that only institutions with more than $100 billion in assets will be affected. “You can say there’s a carve-out, but at the end of the day no one’s really safe,” Greg Mesack, senior vice president of government affairs at the National Association of Federally-Insured Credit Unions, said in lambasting the legislation.
The credit union trade group plans to fight “tooth and nail” against the bill, Mesack said in an interview last week.
Making pro-business Republicans enemies of each other, Sen. Marshall has taken the other side of the argument. He contends that big financial institutions gain at the expense of merchants and retailers. “Our bill is a good compromise, and since the Wall Street big banks are more used to getting their own way than they are to compromise, they of course hate it,” he said in an opinion piece published by the Kansas City Star on Aug. 5.
The conflict is an extension of Durbin’s crusade more than a decade ago for a law restricting fees on debit cards. It became an amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. That law required a cap on debit card fees, plus restrictions on routing.
Visa CEO Al Kelly has thumbed his nose at Durbin’s efforts, noting his company’s ability to continue raising rates as recently as last month. “We think there definitely is still more opportunity in the pricing lever,” Kelly told analysts during the San Francisco-based company’s fiscal third-quarter earnings last month.
While trade groups representing the card networks and their financial institution partners, like the Electronic Payments Coalition, are already vocally attacking the bill, large merchant groups, such as the National Retail Federation and the Merchants Payments Coalition, are predictably egging the legislation on.
Less clear is how much smaller merchants would benefit from the bill, which might require additional costs to add connections for more networks, and whether smaller community banks that are exempt from the legislation may gain an edge on their larger competitors in the card-issuing business.
Those small community voices–whether on the bank side or the merchant side–may ultimately be the ones that carry the day with respect to pushing the bill through Congress, or not.
While the legislation has been assigned to the Senate Banking Committee for a hearing, both sides say the most likely way the bill will pass, if it does, is as part of a larger piece of legislation, just as the Durbin debit amendment to Dodd-Frank won approval a decade ago.
For adversaries who have been sharpening their weapons for more than a decade, there’s likely to be an intense clash before the bill gets anywhere near that vote.