Thursday, April 21, 2022
"As Americans are dealing with the highest rate of inflation in decades, your profits are already high enough, and any further fee increase is simply taking advantage of vulnerable Americans," the lawmakers wrote. The letter was signed by Senator Dick Durbin, D-Ill., Senator Roger Marshall (R-KS), Representative Peter Welch, D-Vt., and Representative Beth Van Duyne, R-Texas.
News of the letter prompted the National Retail Federation to fire off a press release praising the four lawmakers. "These fees drive up prices for consumers and affect shoppers in every congressional district and state in the country," said Leon Buck, NRF vice president and chief spokesman on interchange. "We stand with lawmakers who are willing to take the side of Main Street over Wall Street."
Visa and Mastercard adjust interchange rates twice a year – in April and October. Many increases slated for 2020 and 2021 were scrapped due to the financial fallout companies were experiencing due to the Covid-19 pandemic.
A Mastercard spokesman confirmed interchange rates are getting adjusted this month. "Our changes include some increases and some decreases," he said. For example, he said interchange rates on Mastercard transactions under $5 are being reduced, along with those assessed hotels, casual dining establishments, daycare centers and other businesses hard hit by financial fallout from the pandemic. Visa also recently announced that it was slashing by 10 percent interchange rates assessed businesses with less than $250,000 in yearly Visa card transactions.
The retailing consultancy CMSPI has said its analysis suggests the latest round of interchange increases will primarily effect online consumer credit. The net effect of changes in both brands' interchange rates is $475 million in additional interchange fees, according to CMSPI economists. Lawmakers, in their letter to Mastercard and Visa, cited reports that the two companies collected over $77 billion in credit card interchange and more than $28 billion in debit card interchange last year.
The Mastercard spokesman, in an email to The Green Sheet, emphasized the value merchants place on the ability to accept card payments. "Electronic payments have proven even more valuable since the start of the pandemic," he wrote. "And that's why we're seeing merchants encouraging their customers to use electronic forms of payment due to the significant value they receive in return – a safe, convenient experience and a guaranteed payment."
Lawmakers wrote that they are concerned by what appears to be a lack of competition in card payments. They also raised the specter of more interchange caps, and complained that plans to predicate some lower interchange rates on merchants using the card brands' proprietary security technology "may raise antitrust concerns."
"If Visa and Mastercard operated in a market environment with real competition, we would not be troubled by your planned fee increases," the lawmakers wrote. "However, the current electronic payment system is a clear duopoly that your companies dominate, and you impose fees and rules that merchants, consumers, and small banks have no real choice but to accept."
The letter also noted that in China interchange has been capped at 45 basis points since 2016. "[I]f that rate was not enough for profitability, we suspect both of your companies would not be working so hard to convince the Chinese Communist Party to allow you to operate in China," lawmakers argued.
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