Senate sponsors of the Credit Card Competition Act strode onto the chamber floor to pitch the bill Wednesday, and detractors rolled out their free doughnut trucks to denounce it.
That amounts to a real battle in Washington. Sponsors of the legislation, including Sens. Dick Durbin (D-IL), Roger Marshall (R-KS) and Peter Welch (D-VT) railed against the big bank card issuers and card network behemoths Visa and Mastercard Wednesday in comments made on the Senate floor.
The senators blamed those “Wall Street” interests for raising credit card fees in a way that hurts not only small local merchants, but also ultimately results in consumers paying higher prices. Durbin called out Visa and Mastercard as a duopoly that controls the credit card network market in the U.S., arguing that the industry is overdue for more competition.
The Credit Card Competition Act would try to inject more competition into the industry by requiring that big banks that issue cards ensure there is at least one network available to merchants that isn’t Visa or Mastercard. Durbin noted that the law, if enacted, would only apply to about 30 of the biggest U.S. banks. He also jabbed at the airlines that offer reward programs tied to popular cards.
“I’ll always choose Main Street over Wall Street,” Durbin said Wednesday on the Senate floor. “It is long overdue for Congress to break up the sweetheart deal that Visa, Mastercard and the biggest banks in America and certain airlines enjoy. We must bring the bipartisan Credit Card Competition Act to the floor for a vote.”
Letter to card networks
In light of the card companies potentially raising some fees later this year, Durbin said he wrote a letter to Visa and Mastercard urging them not to move forward with any hikes. He and the other senators argued that higher fees are particularly harmful in an inflationary environment.
Durbin has crusaded for years against the card networks, always seeking to spur more competition in the industry. He also shepherded legislation restricting debit card transactions more than a decade ago, ultimately getting that legislation passed as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
The bill’s best chance for passage in this Congress may be as an amendment to some other major piece of must-pass legislation, such as the “minibus” government funding proposition being debated on Capitol Hill now. Still, Durbin and Marshall failed to push a CCCA bill through to passage in the prior Congress and fell short of being able to attach it to other legislation.
“Every time you swipe your card, every time, the Visa-Mastercard duopoly and the banks line their pockets,” Marshall said on the Senate floor. He called the fees “price-gouging” and contended they’re seven times higher than similar fees in the European Union, referring to it as a “canyon-size gap.”
In a follow-up comment, his office said: “I'm not going to stand for these massive, wealthy corporations price-gouging small businesses at every turn. Visa and Mastercard's duopolistic heavy-handed market practices have disproportionately hurt American families and small businesses for far too long.”
Doughnut truck rolls up in DC
Meanwhile, outside the Capitol, the Electronic Payments Coalition, which opposes the bill on behalf of its bank and card network members, rolled up its truck distributing free doughnuts and materials spelling out their arguments against passage of the CCCA. It was the second time this summer that the free food wagon pulled up, following a first visit in July.
The opponents argue that if the bill becomes law, the card companies will have less funding available for rewards programs offered to card consumers, and for investment in fraud protection.
“Donut Touch My Rewards,” the EPC’s slogan reads. The law would “lead to the elimination of credit card benefits that consumers and small businesses rely on – such as credit card rewards for travel, dining, gas points, groceries, and more,” according to information provided by the coalition.
That interest group also argues that it’s the big retailers that are driving the legislation, not the small mom-and-pop merchants that pepper legislators’ districts.
“The legislation proposed by Senators Durbin and Marshall would do little more than create a windfall for the nation’s largest retailers like Walmart and Target while undermining consumer protections and access to credit as well as jeopardizing the rewards programs millions of American families use to reduce the cost of goods like groceries and gas,” the EPC said in a Wednesday press release commenting on the Senate floor speeches.
EPC Executive Chairman Richard Hunt warned the stakes are high for Marshall. “Roger is betting his entire congressional legacy on this bill,” Hunt said in an interview earlier this month.
He pointed to his side working hard on Capitol Hill to defeat the legislation. “We’re going to shake every hand, we’re going to out-hustle them,” he said.
In the House, the bill has also attracted bipartisan sponsors, but the battle there hasn’t been as pitched as that in the Senate. Politicians aren’t eager to vote on the legislation and pick between big retail and big bank interests, say people involved in the fight.
Card networks push back
While the card network companies sometimes prefer to stay out of the spotlight when this long-running political battles rears up, Visa and Mastercard both voiced their opposition to the bill this week. In separate statements, both sought to sidestep the accusations that they’re raising the key interchange fee.
Not surprisingly, supporters and opponents of the bill disagree over the actual financial consequences that merchants and consumers have suffered as a result of the fees, trading barbs over who’s benefiting from the fees.
“Visa has lowered interchange for the vast majority of small businesses and in key segments such as supermarkets and quick service restaurants,” the San Francisco-based company argued in an emailed statement. “This is true even while we have seen a 180% increase in Visa’s payment volume as more merchants are choosing to accept Visa and consumers prefer to pay with Visa.”
Visa also argued that it has invested heavily in creating a network that protects merchants and consumers from fraud. “As more merchants and consumers migrate to digital payments, ensuring that Visa’s transactions are secure, seamless and reliable has never been more important,” the statement said.
“Consumers and businesses choose Mastercard because of the work we do to reduce fraud, make payments simpler and more streamlined, and protect consumer data,” Mastercard said in an emailed statement.
Welch argued the card companies are wielding their market power to hurt merchants and consumers. “They’re doing what monopolies and duopolies do, they abuse that pricing power,” he said in his comments on the Senate floor. “Our government doesn’t protect our consumers,” Welch said. “Our government is not protecting our merchants and small businesses.”
Meanwhile, a group of consumer advocate organizations on Thursday sent a letter to congressional sponsors of the legislation expressing their support for the bill. The groups signing the letter included the Center for Responsible Lending, U.S. PIRG and Public Citizen.
“The current credit card interchange system is uncompetitive, non-transparent, and harmful to consumers,” the Sept. 14 letter said. “All consumers pay more at stores and at the pump due to the anti-competitive practices of Visa and Mastercard, which set both the rules and prices for merchants to accept electronic payments.”