What retailers need to know about credit-card legislation being considered by Congress

US Senate Majority Whip Dick Durbin endeared himself to retailers and aggravated major credit-card companies in July when he introduced a bill that would provide merchants with a choice regarding who processes card transactions.

Status quo: Right now, merchants process payments made with Visa or Mastercard on those companies’ respective networks. Credit-card companies make money by charging swipe fees, as well as network fees charged to retailers. The two largest card companies charged more than $77 billion in merchant credit-card fees in 2021, Durbin’s office said.

• The Credit Card Competition Act, which is cosponsored by Roger Marshall, aims to increase competition in the credit-card marketplace by requiring additional processing options for payments made on major credit cards.
• Banks issuing the two major types of cards—Visa and Mastercard—would be required to allow transactions on at least two unaffiliated networks.

Retailers rejoice: Industry groups, including the National Retail Federation, the National Association of Convenience Stores, and the Retail Industry Leaders Association (RILA), all voiced support for the bill.

• The bill could help retailers save $11 billion a year, the NRF said, pointing to a report from financial advisory firm CMSPI.
• Some groups pointed to April, when the credit-card giants upped their swipe fees. That rate hike, amid high inflation, exemplified the interest in injecting competition into a market in which Visa and Mastercard have been “fleecing American consumers,” RILA EVP Austen Jensen said in a statement.

It’s not all sunshine and savings: Credit-card groups say the bill poses a threat to consumer financial data because interchange fees are used to cover the cost of fraud detection, among other things. Jim Nussle, president and CEO of the Credit Union National Association called the bill a “massive financial windfall for big-box retailers,” while the National Association of Federally-Insured Credit Unions warned the bill would “increase the cost of credit to consumers.”

This isn’t the first time credit-card rates have gone under the congressional microscope—in 2009, the Senate passed legislation targeting interest hikes and terms. But the future of this new bill isn’t assured; it was officially introduced July 28 and must be considered in committee before heading to a full Senate vote.—MA