Swipe Fee Legislation Reintroduced in Congress

Bipartisan legislation addressing swipe fees was introduced on June 7th in both the U.S. Senate and U.S. House of Representatives with the goal of creating choice for retailers when processing credit card purchases. The Credit Card Competition Act seeks to bring competition to the credit card market and addresses the exorbitant swipe fees paid by retailers every year.

Both bills would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade. The proposed legislation only applies to banks with more than $100 billion in assets, exempting the vast majority of banks and credit unions in the United States, including community banks and other small and mid-sized regional banks.

The legislation proposes an open marketplace for credit card processing in which retailers could choose the payment network to handle a transaction. Currently, networks equipped to route these transactions have been blocked from entering the market by Visa and Mastercard, which dominate the U.S. market and issue 83% of all credit cards.

The bills also would help lower fees and fraud. According to the Federal Reserve, most competing networks currently shut out by Visa and Mastercard charge lower fees and have less fraud, but consumers are unable to benefit from these options. The legislation also would strengthen security by prohibiting foreign networks like China Union Pay from being a network on credit cards issued in the United States.
In the United States, banks that issue Visa and Mastercard credit cards charge a swipe fee that averages 2.25% of the purchase price when the cards are processed over Visa or Mastercard’s networks. These rates are the highest in the world, seven times higher than the average rate in Europe.

Credit and debit card swipe fees have more than doubled over the past decade and are now $160.7 billion a year, according to the Nilson Report, which is considered the most trusted source on statistics in the payments industry. These fees cost the average American family more than $1,000 a year.

The PPA supports this legislation and has worked with National Association of Convenience Stores (NACS), Energy Marketers of America (EMA), and the Merchants Payments Coalition (MPC) to support the federal legislative proposes in the past. The PPA encourages members to contact their member of Congress in support of the Credit Card Competition Act by using the NACS Grassroots Portal or the EMA Legislative Action Center.