Card network titans Visa and Mastercard were on the defensive Tuesday when their executives were grilled by members of Congress at a Senate Judiciary Committee.
The hearing was focused on the proposed Credit Card Competition Act, which would require the financial institutions that issue credit cards to ensure that merchants have access to networks other than Visa and Mastercard, which dominate the industry. The thrust of the bill is to spur competition among networks to reduce the interchange fees that merchants are charged for processing consumers’ credit card payments.
The bill sponsored by Sens. Dick Durbin, a Democrat from Illinois, and Roger Marshall, a Republican from Kansas, hasn’t gathered many additional cosponsors this year, but senators at the hearing from both sides of the aisle voiced support for the bill. The senators first introduced the legislative effort in 2022, but a companion bill hasn’t made much headway in the House either.
Durbin explained at the hearing that merchants in the U.S. pay “swipe” fees for credit card payments that range between 1% and 3% while merchants in Europe pay 0.3% because of regulations there.
Much of the discussion about the legislation was framed in the context of higher prices for goods and services in the U.S. being a burden for consumers at checkout, given inflation in recent years. Executives from Visa and Mastercard testified alongside a law professor from Notre Dame, a small bookstore owner and the general counsel for the National Association of Convenience Stores, which backs the legislation.
“I’m not sure how I’ll come out, but you’re having a hard time convincing me that the fees are set to the advantage of the consumer,” South Carolina Republican Sen. Lindsey Graham said during the hearing.
Another Republican, Sen. John Kennedy from Louisiana, grilled the Visa representative, Bill Sheedy, a senior advisor to CEO Ryan McInerney, as to why his boss was too busy to appear himself to testify before the committee. He warned Sheedy, and Mastercard’s representative, Linda Kirkpatrick, who is president of the Americas, that if they don’t find a way to restructure the system to reduce fees for merchants, Congress will step in.
“You need to sit down and work this out because if you don’t, Congress is going to do something,” Kennedy said. “The high prices in this country are gutting the American people like fish.”
Sen. Peter Welch, a Democrat from Vermont, doubled down on that point, calling the fees “rip-off prices,” and noting that Visa and Mastercard’s CEOs are each earning more than $20 million annually. “You are killing small business in the United States of America,” he yelled.
Sen. Thomas Tillis, a Republican from North Carolina, called the CCCA proposal a “zombie” bill that somehow keeps resurfacing, noting that he doesn’t see any way the bill will be passed this year. Still, he agreed that “small businesses have a legitimate concern” and predicted that Congress will pass legislation to correct the situation if it doesn’t change.
Two members of the committee suggested that Congress may even go further than the current legislative proposal if the situation persists.
“This is just classic collusive, monopolistic behavior,” said Sen. Josh Hawley, a Republican from Missouri who is a cosponsor of the bill. He noted that Visa and Mastercard control about 80% of the market. “This is not a sustainable situation.”
Hawley also called attention to the 20-plus percent interest rates that the card companies charge some consumers. He noted that President-Elect Donald Trump has suggested capping those interest rates. “We could do that,” he said. “I think it’s a great idea.”
Sen. Mazie Hirono, a Democrat from Hawaii, argued along the same lines, suggesting she didn’t know why Congress wasn’t considering capping the fees that the networks can charge merchants, just as it did with debit card interchange rates.
Congress mandated regulations to cap debit card interchange fees as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Durbin spearheaded the legislative campaign to make that happen and the resulting piece of legislation was called the Durbin Amendment.
In summing up the hearing discussion, Durbin noted that it’s an odd moment when the most liberal and the most conservative members of the committee agree. “You have awakened a sleeping giant,” he said in pointing to small U.S. businesses. “I hope we do something about it.”
