A Looming Capitol Hill Meetup Triggers A Renewed Assault on Efforts to Cap Credit Card Costs

As industry lobbyists prepare to converge on Capitol Hill next week, payments interest groups are issuing salvos designed to move the argument over limits on credit card acceptance costs in their favor.

One such advance move came Thursday with an email campaign launched by the Electronic Payments Coalition citing a trade-magazine article that the lobbying group says reinforces the advantages merchants gain from accepting credit cards. The email was aimed particularly at the National Association of Convenience Stores, a long-time critic of card-acceptance costs.

“One thing that NACS doesn’t want lawmakers to know: a prominent convenience store trade publication, CStore Decisions, has done the math and concluded that accepting credit cards provides major value to convenience store owners and boosts their bottom line,” says the email from the EPC, which represents the interests of card issuers and networks and has long opposed moves by merchant interest groups to place controls on card-acceptance costs.

The CStore Decisions article, headlined “Accepting Credit Cards: The Bottom Line Shows It’s Worth It,” was published in January 2020 and lays out a number of advantages merchants gain from card acceptance, including convenience for customers and improved cash flow. But it also points out how cards “can pose an assortment of issues for business owners.” Among these issues, the article says, is that “it can be very costly for retailers to process credit cards,” with rates running from 2% to 4% per transaction.”

Information wasn’t immediately available regarding the extent of the EPC’s email campaign. An EPC spokesperson cited data the group has developed indicating convenience stores have raised their prices to consumers in recent years even as credit card interchange rates–the wholesale price for credit card transactions that acquirers pay issuers before passing the fee along to merchants with a markup–have remained stable.

Doug Kantor, general counsel for NACS, points to the CStore Decisions article’s age. “It reeks of desperation for [the EPC] to dredge up a 3-year-old article and stretch it beyond what it said,” he says. “The point they make that there are reasons for retailers to take credit cards is true. Retailers don’t really have a choice. Our problem is how pricing [to merchants] is set.”

Merchants have long argued that credit card acceptance fees—often labeled interchange, though total costs often includes other fees—levied on merchants are established by a “cartel” of card networks rather than by a free market. Card networks like Mastercard and Visa determine card-acceptance rates, which are marked up and passed on to merchants by processors. Card issuers receive the fees.

Legislation introduced last year, merchant groups argue, would bring more competition to the market by requiring processors to offer a second network besides Mastercard or Visa for transaction routing. The bill, called the Credit Card Competition Act, was launched by Sen. Richard Durbin, D-Ill. Groups like the EPC and other critics argue the legislation would introduce unnecessary price controls to what is already a competitive market.

Kantor, who predicts the CCCA will pass this year “largely as is” after failing passage in 2022, argues it’s not unusual for trade groups to meet with legislators to further their interests. “We’re doing [our meeting] next week as we do every year,” he says. “It’s not unusual for the credit card industry to get nervous when we meet.”