Durbin summons Visa, MC CEOs to Capitol Hill

Senator Richard Durbin, D-Ill., wants the CEOs of Mastercard and Visa to testify on Capitol Hill. No substitutions will be accepted. "I am writing you directly because I understand that your staff have declined my prior requests for you to testify at this hearing, and, instead, have offered to send Bill Sheedy, your senior advisor, in your place," Sen. Durbin wrote in a letter to Visa CEO Ryan McInerney.

Sen. Dubin scheduled an April 9 hearing before the Senate Judiciary Committee, which he chairs, on competition in the credit card industry. Mostly, though, he wants to ask the CEOs of Visa and Mastercard, along with executives from leading airlines United and American, to justify claims that the Credit Card Competition Act will torpedo credit card rewards programs.

The Credit Card Competition Act, authored by Sens. Durbin and Roger Marshall, R-Kan., would require that merchants have the option of choosing from at least two networks for the processing of card payments. Only one of those networks can be owned by Visa or Mastercard, however.

Why not call up retailers, too?

To the list called to testify before the Senate Judiciary Committee in April, the Electronic Payments Coalition wants Sen. Durbin to add the CEOs of corporate mega-stores. EPC is a broad coalition of financial institutions, trade associations, networks, issuers and acquirers that has been publicly pushing back on attempts to regulate how card payments are processed.

"These new government mandates are about little more than lining the pockets of the nation's largest mega-stores – not about saving businesses on Main Street or American families any money," EPC Executive Chairman Richard Hunt insisted.

Hunt pointed to a recent study that revealed how anticipated savings ushered in by the Credit Card Competition Act would disproportionately benefit the top five businesses in the United States. That study also determined that virtually no savings would accrue to retailers with less than $500 million in annual sales.

Hunt also took issue with the way the Credit Card Competition Act has been considered in Congress. Typically, bills first and foremost are referred for consideration by a committee with jurisdiction over the matter. In the case of the Credit Card Competition Act, that would be the Senate Banking Committee, which would hold hearings and votes before referring the legislation to the full Senate for consideration.

No hearings have yet been held or scheduled by the banking committee regarding the Credit Card Competition Act, at least during the current Congress. That hasn't stopped Sen. Durbin from trying to attach the legislation to several unrelated, must-pass bills, like one funding the military.

$12 billion in lost rewards

Not only will big retailers reap huge benefits from the Credit Card Competition Act, but smaller retailers will pay, and they will pay dearly, the EPC stated.

Hunt pointed to a study by Indraneel Chakraborty, finance department chair at the University of Miami, indicating small business owners would lose roughly $12 billion in credit card rewards that they amas when making purchases with their business credit cards. That's about a tenth of all yearly credit card rewards, Chakraborty said.

"The CCCA would result in the reduction of such programs, costing small businesses over $1 billion in lost rewards as well as a decline in access to credit," Chakraborty wrote. "This will further diminish their ability to compete with larger businesses."

Credit card companies flying planes

Durbin isn't buying it. "Visa and Mastercard have aggressively opposed efforts to bring competition to the credit card market in order to protect the dominant market position they share," Durbin said.

Among other things, the senator noted, the card companies and their allies, "through false and misleading advertising," have falsely claimed the bill would "ban" credit card rewards programs.

"At the same time, both American Airlines and United Airlines have aggressively opposed efforts to bring competition to the credit card market in order to protect the billions of dollars in windfall profits their companies collect through their co-branded credit cards," Durbin said. "These airlines have become credit card companies that fly planes."

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