WASHINGTON—During an antitrust hearing yesterday, Senate Judiciary Committee Chairman Richard Durbin (D-IL) had choice words for rising credit card swipe fees, according the Merchants Payments Coalition (MPC), of which NACS is a founding member.

Durbin, who authored a key legislative victory for the convenience retail industry in 2010 that brought transparency, competition and predictability to debit card fees, cited Visa and Mastercard’s plans for a nearly $1.2 billion increase in credit card swipe fees scheduled to take effect in April.

“They didn’t forget,” Durbin said, referring to his earlier legislation. “They’re waiting for an opportunity to get even again. Where is the policing authority to stop this duopoly from doing this to every merchant and retailer in America? I don’t see it.”

“This draws attention to a vitally important issue—that credit card swipe fees are already too high and Visa and Mastercard are trying to use their power to raise them even higher on the backs of small businesses during the middle of a pandemic,” said MPC Counsel Doug Kantor in a press release. “Sen. Durbin’s concern that Visa and Mastercard are trying to ‘get even’ is right on the mark and his question of what can be done to bring them under control is one that needs to be answered by Congress and the enforcement agencies. These fees are among the highest in the world and neither merchants nor their customers can afford to pay more.”

Durbin’s comments came during a subcommittee hearing on antitrust reform, and he expressed concern about “the power of Visa and Mastercard. […] They were not negotiated—they were mandated,” he said, referring to what he learned about swipe fees during previous hearings. “Visa and Mastercard said this is what you will pay for each transaction at your restaurant or shop and you have no bargaining power whatsoever. If you don’t want to pay it, don’t use Visa or Mastercard. See how long you last.”

Durbin said the fees are “far in excess of any reasonable measure of cost” and far higher than they would be in a competitive market. Visa and Mastercard are “so dominant in the payments market that merchants couldn’t stay in business without using their cards.”

The April increase will come “just in time for your little restaurant that somehow managed to survive and reopen in a pandemic to go into business and have your credit card company say now you’re going to pay us even more,” Durbin said, adding that the cost of swipe fees is “ultimately borne by consumers across America” because they drive up prices.

The hearing came a week after Durbin and Rep. Peter Welch (D-VT) sent Visa and Mastercard a letter asking them to cancel the April fee increases, saying they would “undermine efforts to help the economy recover.”

Visa and Mastercard are reportedly set to implement a wide-ranging restructuring of the swipe fees banks charge merchants to process credit card transactions beginning in April. While the matrix of fees is complex, the net impact is estimated at increases of $768 million a year for Visa and $383 million for Mastercard, or a total of $1.15 billion, according to analysis by global payments consulting firm CMSPI. Increases are expected for Visa and Mastercard’s most prominent credit card programs, and for online transactions, which have grown sharply during the pandemic and already carry higher fees than in-store transactions. In addition to paying higher fees, merchants shoulder a vast majority of fraud costs online.

Swipe fees vary widely according to the type of card, type of transaction and the size of the merchant, but average 2.25% of the transaction amount for Visa and Mastercard credit cards, according to the Nilson Report, a trade newsletter that follows the card industry. The fees have increased dramatically in recent years, more than doubling from $25.6 billion a year in 2009 to $67.6 billion in 2019 for Visa and Mastercard credit cards alone, according to Nilson. Overall processing fees paid by U.S. merchants to accept all card payments totaled $116.4 billion in 2019, up 88% over the previous decade. 

The fees are among most merchants’ highest costs after labor and drive up prices for goods and services paid for by the average U.S. family by hundreds of dollars a year.

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