Credit Card Interchange Bill to Be Introduced

Credit union and banking trade groups strongly oppose legislation.

As expected, a bipartisan group of senators will introduce legislation this week that would change the credit card interchange system.

The bill is likely to be introduced in the House at the same time.

And also, as expected, reaction to that news was swift, as the financial services and retail sales industry traded a volley of charges.

Context

The legislation would require the Federal Reserve to issue rules that would ensure that large credit unions and banks that currently use the four-party card processing system be required to use at least one affiliated network in addition to Visa and Mastercard.

Support for the Legislation

On the Senate side, the bill sponsors include Sens. Dick Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio. On the House side, Reps. Zoe Lofgren, D-Calif., and Lance Gooden, R-Tx., are expected to be original cosponsors.

“Bringing real competition to credit card networks will help reduce swipe fees and hold down costs for Main Street merchants and their customers,” Durbin said.

“Working families all over Ohio are getting crushed by inflation every time they go to the grocery store or fill up on gas,” Vance added. “Meanwhile, two massive companies have a stranglehold on credit card swipe fees and are increasing the costs of these everyday essentials.”

The lawmakers said that in April 2022, Visa and Mastercard increased swipe fees by almost $1.2 billion a year, ignoring bipartisan requests from members of Congress and business groups.

Opposition From CU Groups

Banks and credit unions are united in their opposition to the measure, NAFCU President/CEO Dan Berger said during a Wednesday webinar sponsored by the American Banker.

“We are locked in arms across the financial services industry,” he said, adding, “We’re ready to fight tooth and nail.”

NAFCU and CUNA have argued that the interchange fee system helps defray expenses such as fraud protection and that retailers would not pass any savings from enactment of the legislation on to consumers.

Retailers have a different perspective.

“Swipe fees are one of the most expensive costs restaurant operators have to manage—behind food and labor costs—and being able to accept credit cards is essential to running a restaurant,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association.