The Senate Banking Committee held a hearing on November 19th titled “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System”. Chairman Dick Durbin (D-IL) was the author of the “Durbin Amendment” fourteen years ago that lowered interchange fees on debit card transactions and he has introduced the Credit Card Competition Act (CCCA) during this Congress to lower credit card interchange fees. In his opening statement, Senator Durbin said his bi-partisan legislation would “break the Visa Mastercard stranglehold on the market by requiring only the largest banks, those with more than $100 billion in assets, to enable two networks on their cards and one must be another company other than Visa or Mastercard.” He went on to say the merchant could then choose the rail by which they want to route credit card transactions.
During the hearing, there was bi-partisan consternation from Senators with the interchange costs that small businesses are paying on credit card transactions. Testifiers supporting legislation to bring greater competition in the credit card network space argued that consumers are paying more to use their credit card and passing the Credit Card Competition Act would lower costs for small businesses and the consumers they serve. Testifiers for Visa and Mastercard indicated that the credit card system is very competitive, and that interchange provides for innovation in the electronic payments system that protect consumers from fraud.
Testimony indicated that Europe regulates interchange fees by capping them at 0.3% while the average interchange rate in the U.S. is 2%. U.S. Senator Lindsey Graham (R-SC) asked testifiers whether regulation or competition is a preferred way to lower fees. Proponents of lowering interchange fees indicated that the CCCA would introduce competition and is their preference while Visa and Mastercard indicated that lowering interchange through regulation or legislation will increase costs on consumers and likely eliminate rewards programs currently offered. Senator John Kennedy (R-LA) strongly urged Visa and Mastercard representatives to get together with the retailers after the hearing and to work something out, otherwise he indicated, “Congress is going to do something”. Sen. Thom Tillis (R-NC) indicated that the bill will not move in this Congress but suggested to Visa and Mastercard that, “you have one and a half Congress’ to find a solution”. Tillis also pointed out the absence of an invitation to credit union or bank testifiers to the hearing to give their perspective on the issue.
