CUNA and NAFCU Join Banks Opposing Bill to Limit Interchange Fees
Credit union trade groups and banks have opposed a bill introduced in the US Senate on Thursday that would allow processors other than VISA and Mastercard to handle credit and debit card transactions at fewer than 36 major banks. and one credit union: Navy Federal.
Sponsors and retailers who pay the fees said the bill would reduce costs for consumers, as retailers would pass on the savings made by processors at a lower cost to their customers.
CUNA, NAFCU and banking groups opposed the bill, saying it would fund systems designed to provide security against fraud and privacy breaches.
CUNA President and CEO Jim Nussle said the credit card competition law poses a serious threat to the sensitive financial data of millions of consumers by allowing the nation’s largest retailers to circumvent secure payment networks established.
The CUNA said interchange fees cover the costs of detecting fraud, monitoring credit and protecting against fraudulent purchases, which it says keeps consumers, merchants and financial institutions safe.
“The so-called Credit Card Competition Act is nothing more than a massive financial windfall for big-box retailers at the expense of consumers,” Nussle said. “This legislation would compromise access to safe and affordable credit.”
NAFCU President and CEO Dan Berger said the legislation fails to recognize the strong competition that exists within the payments network.
“With no minimum consideration for the overwhelming risk of untested networks, the loss of safe and affordable banking products, and the higher cost of credit it would pass on to consumers and financial institutions, it is clear that this bill is just bad policy all around,” Berger says. “NAFCU and its members will work hard to stop this legislation in its tracks.”
The bill would require major credit card issuing banks to offer a choice of at least two networks on which an electronic credit transaction can be processed, with some exceptions.
The bill was introduced by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kansas). Durbin said the bill would allow innovators to compete in the marketplace, by reducing swipe fees.
“Credit card swipe fees inflate the prices consumers pay for groceries and gas,” Durbin said. “It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly.”
A press release from the Durbin office cited Fed data showing that Visa and Mastercard account for nearly 576 million cards, or about 83% of general purpose credit cards in circulation. Last year, consumers spent $3.49 trillion using Visa and Mastercard credit cards in the United States.
Last year, Visa and Mastercard charged merchants $77.5 billion in fees on these transactions, including swipe fees paid to credit unions and issuing banks, and network fees that merchants pay directly. to Visa and Mastercard, according to Durbin’s press release.
A Durbin press release said the bill’s provisions only apply to issuers with more than $100 billion in assets, meaning that among credit unions, it would only affect the Navy Federal Credit Union, Vienna, Virginia ($153.4 billion in assets, 11.1 million members as of March 31). Navy Federal held $21.7 billion in credit card debits as of March 31, one-third the amount of all credit unions.
According to the National Retail Federation (NRF), less than 36 establishments are concerned, but they represent approximately 90% of the volume of Visa/Mastercard credit cards.
According to the National Retail Federation, merchants pay around $2.20 or more in fees on a $100 purchase. Typically, it is divided this way:
- $1.80 goes to the card-issuing bank or credit union.
- $0.30 goes to Visa or Mastercard.
- $0.10 (or more) goes to the merchant’s bank.
PSCU, St. Petersburg, Fla., CUSO Payments, earlier this month reported its member credit unions processed $140 billion in transactions in the 12 months ending June 30. Under a 1.8% split, credit unions would have received about $2.5 billion. .
The NRF said sweeping fees are among merchants’ highest costs after labor and drive up prices paid by consumers.
The NRF also said competitors could include a competing credit card network or “one of many independent networks like Star, NYCE or Shazam that offer equal security but lower fees.”
Leon Buck, the federation’s vice president for government relations, the bill would open up processing to more than a dozen companies “that can do the job as well” as Visa or Mastercard.
“Credit card swiping fees have been driving up prices paid by American consumers for decades, but are especially burdensome amid the near-record inflation families face today,” Buck said.