A Senate Panel Sends a Signal: Time to Cut a Deal on Swipe Fees

Members of the Senate Judiciary Committee told representatives of Visa Inc., Mastercard Inc., and the merchant community on Tuesday it was time to “negotiate” an end to their decades-old dispute over credit card swipe fees.

The comments came during a Senate Judiciary Committee hearing billed as “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System.” The committee is chaired by Sen. Richard Durbin, D.-Ill., co-sponsor of the Credit Card Competition Act.

If a solution to the ongoing dispute over swipe fees does not emerge, committee members warned, Congress will settle the dispute, and neither party will like the outcome. “Get in the room and solve the problem, because I’ll guarantee you the solution coming from Congress won’t be good for anyone,” said Republican Sen. Thom Tillis of North Carolina.

Tillis also said that while he wants to see Visa and Mastercard be successful, the cost of swipe fees is a problem for small businesses. The outcome he would like to see is for small businesses to tell Congress within the next 24 months that, while “we’d always like more [in the way of swipe fee relief], we got a fair deal.”

If that outcome were to happen, the CCCA would go away, Tillis said. He was also critical of the CCCA saying it “is a lot like a zombie in a ‘Walking Dead’ episode, just when you think you’ve killed it, it comes out of the closet again.”

Tillis said he did not think the CCCA was the solution to the ongoing dispute over swipe fees, as laws in other countries regulating the fees have proven to be problematic. “Work something out that is not disruptive and does not repeat the mistakes of other countries that made the same mistake of overreach,” Tillis said.

Tillis added that the CCCA “is not going to pass” in the current Congress, in part because there are not enough legislative days left in the session and because the votes are not necessarily there to pass it.

Some of the harshest comments from members of the committee were directed at Visa and Mastercard. Speaking before Tillis, Sen. John Kennedy, a Louisiana Republican, told the card networks that, if Congress were left to solve the dispute over swipe fees, when it was through the networks would either look like the “Post Office or the Dallas Cowboys.” The NFL team has a three wins, seven losses record so far this season.

“Sit down and work this out, because if you don’t, Congress will do something,” Kennedy said.

Despite the harsh words for Visa and Mastercard, Kennedy acknowledged that if a vote on the CCCA were held today, he was not sure how he would vote, a sentiment echoed by other members of the committee.

Responding to the committee member’s comments, representatives of the merchant community said they would welcome an opportunity to sit down at the negotiating table with Visa and Mastercard and work out a solution.

“Merchants have been at the table waiting patiently, but the card networks have shown no interest,” says Doug Kantor, general counsel for the National Association of Convenience Stores, who testified at the hearing. “Every day the card networks do nothing [about providing swipe fee relief] means billions of dollars for them, so that’s why we are asking Congress for help.”

Kantor argues that if Congress were to pass the CCCA or take other steps to provide swipe-fee relief, it would break the Visa and Mastercard duopoly and create true competition that would pave the way for negotiations. “That’s why we want Congress to act,” Kantor says. “Any action from Congress would be a dramatic improvement” over the current system.

The hearing was not well-received by the Electronic Payments Coalition, which represents banks and the bank card networks

“This hearing was so blatantly biased and one-sided, it practically needed a disclaimer saying it was bought, paid for, and sponsored by the campaign donations of the nation’s largest corporate mega-stores,” EPC executive chairman Richard Hunt said in a statement. “Credit and debit cards fueled more than $90 trillion in economic activity since 2006 and are vital to not only our economy but also to businesses and consumers because they facilitate secure, safe, convenient, and timely payments.

Hunt also argued the hearing “ignored the small businesses who oppose new mandates on our payment systems, the independent reports showing the Durbin-Marshall bill would be a windfall for corporate mega-stores without any guarantees of lower prices, and in a display of arrogance, blocked community banks and credit unions from explaining how these new mandates would make it harder for them to serve their local communities.”

If supporters of the CCCA were serious about protecting consumers and small businesses, “they would ask corporate mega-stores to answer for their failure to pass savings along to consumers when Congress passed price-fixing legislation on debit cards in 2010,” Hunt said.