A bipartisan group of Senators has reignited the controversy over credit card swipe fees by reintroducing the Credit Card Competition Act (S. 1838). While the legislation has support from groups representing convenience stores, franchises, restaurants and other retailers, opposition from credit unions, community-based groups, and consumers underscores complex dynamics at play.
The bill by Sens. Dick Durbin (D-IL), Peter Welch (D-VT), Roger Marshall (R-KS) and J.D. Vance (R-OH) is aimed at weakening the hold over interchange fees by Visa and Mastercard. The companies control over 80% of the credit card market, according to the Senators.
Interchange fees, also known as swipe fees, are paid by retailers who use the credit card companies’ processing technology. Proponents of the Credit Card Competition Act claim the fees are excessive.
Critics of the legislation, including the Electronics Payments Coalition, argue that swipe fees serve a vital purpose. According to the coalition, the fees help pay for specific costs associated with the processing systems, including customer service, system operations, data protection, and card production costs. The card companies contend that these fees are crucial to maintaining the smooth operation of the payment ecosystem.
"Interchange fees pay for customer service by the card companies when needed by merchants, system operations, protection of customer data, and card production costs,” according to the Electronics Payments Coalition.
The Coalition states on its website that retailers have voluntarily adopted electronic payments as a means to increase sales, broaden their customer base, reduce the risk associated with cash handling, minimize bounced checks, and guarantee payment. Walgreens revealed that it loses as much as $1.3 million annually through non-electronic transactions due to the time required for cashiers to manage cash, including to provide precise change back to consumers.
The benefits of electronic payments extend beyond retailers' bottom lines. According to the coalition, the Salvation Army's "cashless kettles” get a boost in average donations – from $2 to around $15 – through the use of credit or debit cards, a 650% increase. New York City cab drivers witnessed a surge in ridership, revenue, and tips after the adoption of electronic payments.
Similar legislation enacted in 2011 capped the fees that retailers pay to process debit cards, leading to an annual savings of $1 billion for gas retailers. However, critics argue that despite the savings, there is little evidence to suggest the retailers have passed the savings on to consumers.
In a statement announcing the bill, Sen. Marshall cited support from a constituent group, the Associated Wholesale Grocers in Kansas City. On the other hand, the Kansas Business Daily this week quoted Lois Spillman, a retiree in Kansas who opposes the legislation.
“As with normal people, I look forward to receiving cash back through SAM’s rewards and my regular credit card. That would be eliminated,” Spillman told the newspaper. “Several of my family members take advantage of the programs for all their monthly purchases and expenses.”
