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Lobbying from retail and credit union groups intensifies surrounding legislation to expand credit card processing industry.
In a sign of how furious lobbying on the issue has become, 1,688 companies and 231 trade associations this week sent a letter to every member of Congress pushing for passage of Senate legislation designed to expand the credit card processing industry—a measure that credit union trade groups oppose.
The letter-writing campaign, organized by the Merchants Payments Coalition, urges passage of S.4674, which would require the Federal Reserve to issue rules that would ensure 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.
At the same time, credit union trade groups continued their push opposing the bill. In an op-ed on the RealClearMarkets website, NAFCU President/CEO B. Dan Berger wrote that the bill is nothing more than a “bailout to greedy retailers.”
Inside the Letter
The payments coalition, which includes retailers and other businesses that accept credit cards, disagreed.
“As members of the retail community and champions of the free market we typically do not support government intervention except in cases where a market is not functioning,” they wrote. “That is the case with the credit card marketplace in the United States.”
They said that Visa and Mastercard control more than 83% of the U.S. credit card market and that they do not have to compete with any other service providers, adding that Visa and Mastercard bar their competitors from having a shot at business with banks that issue their cards.
“This blocking of competition drives up prices for merchants and consumers, harms security and strangles innovation,” they charged.
The bill, they said, would bring relief to consumers and retailers by requiring that Visa and Mastercard compete with other networks.
Response From Credit Union Groups
Credit union trade groups also are contacting lawmakers.
“Additional changes to the card network system would introduce insecurity with no guarantee of consumer or small business benefit,” William Mellin, president/CEO of the New York Credit Union Association wrote in a letter to Senate Majority Leader Sen. Charles Schumer, D-N.Y. “Even with exemptions for small institutions, credit unions can still be harmed as a member of an interconnected financial ecosystem.”
He added that his association “holds that merchant profits should not come at the expense of the financial health and security of New Yorkers.”
What Comes Next?
The legislation faces an uncertain future.
Schumer, to a large degree, controls what legislation goes to the Senate floor. Senate and House committees have not yet considered the legislation. The measure is unlikely to be considered in separate bill, but supporters could try to tuck it into must-pass legislation, such as a Continuing Resolution or omnibus bill that provides funding for federal programs.
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