A bill that would limit Visa and Mastercard’s control over swipe fees has been formally introduced in the Senate.
Sen. 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 reduce merchant card processing costs.
The proposed rule would only apply to banks with more than $100 billion in assets. It comes after years of merchants complain that the existing system where Visa and Mastercard independently set credit card interchange fees, which cover card network security and other infrastructure costs, is anti-competitive.
“Credit card swiping fees inflate the prices 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 on Wednesday evening. During Call for Mastercard winnings, CEO Michael Miebach said the interchange concept has served the payment ecosystem well and the card brand promotes competition. Visa and Mastercard too recently claimed for lowering interchange rates for some merchants.
Only Visa and Mastercard, which are considered “four-party networks” because of their role as intermediaries between consumer and merchant banks, would be affected by the bill, the statement said.
Banks covered by the proposed bill could offer Visa or Mastercard as a credit card routing option, and the second option could be another payment card network such as American Express or Discover, any card network from debit or a fintech company, according to the statement.
Visa and Mastercard did not comment on the bill before the deadline.
The proposed bill echoes an aspect of the Durbin Amendment to the Dodd-Frank Act of 2010. This rule, which came into effect in 2011, was intended to expand debit card network competition by requiring banks to offer merchants the choice between two unaffiliated debit card networks. on each debit card.
Unlike the previous Durbin Amendment, which set a cap on debit card interchange rates for banks with more than $10 billion in assets, the credit card competition bill sets no cap. at credit card interchange rates.
Merchants pay an average of 2.2% of the purchase amount for each credit card transaction processed on the Mastercard and Visa rails, which amounts to billions each year, according to the National Retail Federation.
“Credit card swiping fees have been driving up prices paid by American consumers for decades, but are especially burdensome amid the near-record inflation families face today,” said Leon Buck, NRF vice president for government relations, 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 is joining Senator Durbin in introducing legislation to help large retailers increase their profits,” American Bankers Association spokeswoman Sarah Grano said in a statement.
Although the bill only focuses on the biggest banks, smaller institutions are wary of its effects.
“The Durbin Amendment [that went into effect for debit cards in 2011] 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 Thursday.
The Federal Reserve would have one year to develop implementing rules after it is signed into law, and the bill would go into effect 180 days after it is finalized.