U.S. Senate Judiciary Committee Holds Hearing On Excessive Swipe Fees

Last Wednesday, the U.S. Senate Judiciary Committee held a hearing entitled, “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.”

Both Senate Judiciary Committee Chairman Dick Durbin (D-IL) and Ranking member Chuck Grassley (R-IA) questioned the excessively high swipe fees that continue to wreak havoc on small businesses across the country including convenience store owners.

“The credit and debit card systems are not competitive marketplaces. It’s a sweetheart deal for the dominant networks, for the biggest banks and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price,” Durbin said.

Swipe fees are the second highest operating cost for convenience store retailers. In 2019, the industry’s pre-tax profit was $11.9 billion and card fees paid by the industry were $11.8 billion.

For small business energy marketers, swipe fees are the highest expense other than payroll.

The swipe fees set by Visa and Mastercard vary according to type of card, type of transaction and size of merchant, with hundreds of combinations possible.

It is difficult to understand swipe fee costs, even for payments experts, and retailers do not know how much revenue is derived from a particular transaction at the time of purchase.

Doug Kantor, with the National Association of Convenience Stores (NACS), spoke on behalf of the Merchant Payments Coalition (MPC) in which EMA is a contributing member, noted that swipe fees jumped by enormous amounts on motor fuel purchases during the past year.

“Swipe fees are often near ten cents per gallon on a fill-up today. That is simply too much for local retailers or their customers to bear,” Kantor said. Further, Kantor noted, “One of two things is happening when the credit card industry argues that consumer prices and retailer costs don’t flow through-either they don’t believe competitive markets work, or they’ve been living so long with centrally setting the fees that they’ve forgotten how competitive markets actually work.”

Senator Lee (R-UT) commented that consumers are struggling from inflation and suggested credit card companies are not doing enough to lower rates and that it’s like “cartel behavior.”

Laura Shapira Karet, Giant Eagle, Inc.; Bill Sheedy, Visa Inc.; Linda Kirkpatrick, Mastercard; and Charles Kim, Commerce Bancshares, Inc. also testified before the committee.

There are nearly a dozen independent networks that are equipped to route transactions, but a handful of dominant networks have prevented them from competing in the credit space.

Nearly ten years ago, Congress acted to open the debit card market to competition, and businesses and consumers have all benefited. But today, retailers have limited choice of network when it comes to credit card transactions.

Credit cards only have one network enabled on a card and lack any back up options if there is an outage. This results in higher costs for the consumer, less security, and less innovation.

EMA will be urging Congress to introduce credit card routing competition legislation to give small business energy marketers at least two choices to route transactions, similar to today’s debit cards.

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