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WASHINGTON, D.C. - On Wednesday, June 7, a bipartisan group of House and Senate lawmakers introduced the Credit Card Competition Act of 2023 (S.1838/H.R.3381), legislation that would enhance competition and choice in the credit card network market which is currently dominated by the Visa-Mastercard duopoly. This landmark legislation would help fix a broken market that has allowed Wall Street megabanks and global card networks to block competition and unfairly profit at the expense of LBM dealers and small business retailers for far too long. Building off of debit card competition reforms enacted by Congress in 2010, the bill would direct the Federal Reserve to ensure that giant credit card-issuing banks offer a choice of at least two networks over which an electronic credit transaction may be processed. The bill was introduced in the 118th Congress by U.S. Representatives Zoe Lofgren (D-CA), Lance Gooden (R-TX), Tom Tiffany (R-WI) and Jeff Van Drew (R-NJ), along with U.S. Senators Dick Durbin (D-IL), Roger Marshall (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH).
“Over the last decade, LBM dealers across the country have been hit with exorbitant increases in credit card swipe fees that serve as a direct tax on their bottom line,” said NLBMDA President & CEO Jonathan Paine. “NLBMDA applauds this key legislation, which will significantly improve conditions for the LBM industry and the small business community.”
Big banks and card networks like Visa and Mastercard charge small retailers more than 2% of the customer’s total bill every time a credit card is used to make a purchase. Credit and debit card swipe fees have more than doubled over the past decade and soared 16.7% in 2022 alone to a record $160.7 billion. They are most retailers’ highest cost after labor – far too much to simply absorb – and drive-up consumer prices by more than $1,000 a year for the average family. With few people using cash today, small business retailers have no choice but to accept cards for payment. The Credit Card Competition Act would address this by requiring that credit cards issued by the nation’s largest banks be enabled to be processed over at least two unaffiliated networks – Visa or Mastercard plus an independent network such as NYCE, STAR or SHAZAM. LBM dealers would be allowed to choose which network to use, meaning payment networks would have to compete to offer the best pricing, security and service.
“When it comes to Main Street vs. Wall Street, I’ll stand with Main Street businesses, who are the backbone of our economy, every single time,” said U.S. Senator Roger Marshall (R-KS). “At a time of economic uncertainty and skyrocketing inflation, these credit card companies are increasing their hidden swipe fees and price gouging small businesses and consumers. Our legislation would rein in the big banks and the credit card industry, drive down costs for convenience stores, gas stations, and other small businesses, and ultimately pass those savings down to consumers. This legislation is the right thing to do, and I am proud to reintroduce it with bicameral and bipartisan support.”
Swipe fees have been able to rise so much because of lack of competition with Visa and Mastercard controlling more than 80% of the credit card market. And, unlike with debit cards, they block their competitors from handling many credit transactions. They restrict processing to their own networks, prohibiting competition from innovative independent payment networks that offer both lower fees and better security. Small retailers have the narrowest profit margins and fewest resources and are hit hardest by continuing unjustified increases in swipe fees.
“Interchange fees put a brutal strain on our small businesses, but because of the Visa-Mastercard duopoly in the credit card network market, Main Street businesses have no choice but to pay these crushing fees or risk going under,” said U.S. Senator Peter Welch (D-VT). “The Credit Card Competition Act will restore choice and competition in the credit card network market, helping to bring down costs for small businesses and making it easier for these essential businesses to thrive.”
The Credit Card Competition Act is a top priority for NLBMDA that would inject real competition into the credit card market to help protect LBM dealers from excessive swipe fees. The bill is also supported by a wide range of organizations including the American Beverage Licensees, Armed Forces Marketing Council, Energy Marketers of America, FMI, Hispanic Leadership Fund, International Franchise Association, National Association of College Stores, National Association of Convenience Stores, National Association of Theater Owners, National Grocers Association, National Restaurant Association, National Retail Federation, National Wildlife Refuge Association, NATSO, NFIB, Retail Industry Leaders Association, SIGMA, U.S. PIRG, and over 200 state and regional business associations.
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