Reintroduced federal legislation would require more than one network to be enabled on credit cards, giving food retailers options in payment routing and facilitating competitive innovations such services as fraud protection for merchants and consumers.
The bipartisan Credit Card Competition Act, which was reintroduced in Congress by Sens. Dick Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt.; and J.D. Vance, R-Ohio; and Reps. Lance Gooden, R-Texas; Zoe Lofgren, D-Calif; Jeff Van Drew, R-N.J.; and Tom Tiffany, R-Wis, has received the strong endorsement of trade groups FMI – The Food Industry Association, the Merchant Payments Coalition (MPC) and the National Grocers Association (NGA). The legislation, which was originally introduced last year, would require more than one network to be enabled on credit cards, giving food retailers options in payment routing and facilitating competitive innovations such services as fraud protection for merchants and consumers.
“Due to a lack of competition, credit card companies have been able to exponentially increase hidden processing fees that grocers are forced to pay for accepting credit cards as payment,” noted Jennifer Hatcher, chief public policy officer and SVP, government relations at Arlington, Va.-based FMI. “Card-processing fees in the U.S. are some of the highest in the world, totaling $160.7 billion in 2022, according to Nilson Report. Excessively high credit swipe fees that exceed grocers’ profit margins force grocers to have to increase prices. These fee increases disproportionately impact lower income Americans, those who rely on cash, and those who do not have access to high credit card rewards.”
In addition to FMI’s endorsement letters to the House and Senate sponsors of the bill, the MPC, which is co-led by FMI, sent an endorsement letter to Congress from 270 associations representing businesses across the United States.
“Lawmakers laid the groundwork last year and we look forward to them passing this bipartisan, pro-Main Street legislation this year,” observed MPC executive committee member and National Association of Convenience Stores General Counsel Doug Kantor. “Swipe fees that drive up costs for small merchants and prices for American families are already the highest in the industrialized world and are going nowhere but up. Lack of competition is the problem, and the sooner the card industry can be made to compete the better. As policymakers work to reduce inflation, this carefully crafted bill will lead to lower fees and better security while helping merchants hold down prices.”
The MPC pointed out that under the proposed legislation, banks would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning that networks would have to compete over fees, security and service. According to the group, consumers would still use the same Visa and Mastercard cards they now use, rewards would be unaffected, and community banks and small credit unions would be exempt.
“This critical legislation would bring much-needed reforms to a broken credit card marketplace that unfairly impacts small businesses like independent community grocers,” said Christopher Jones, SVP of government relations and counsel at Washington, D.C.-based NGA, which represents that segment of the industry. “Visa and Mastercard control 80% of the credit card marketplace and will not negotiate fees with independent grocers. In a razor-thin margin industry like grocery, we have no choice but to pass those fees on to consumers in the form of higher grocery prices at a time when consumers are reeling from high food price inflation. The Credit Card Competition Act would provide much needed relief to independent grocers and their customers who benefit the most from competitive markets.”
“Small businesses are calling out the loudest for swipe-fee reform because we are hit the hardest by these fees,” said Mike Beal, CFO of Kansas City, Kan.-based family-owned grocer Balls Foods, who spoke at a Capitol Hill news conference on June 7. “Small businesses pay the highest swipe-fee rates, we don’t have the resources to navigate complex credit card contracts, and we have absolutely no leverage to negotiate as these fees rise higher every year. Small businesses need swipe-fee reform, and we need it now.”