Bill is introduced to bring down restaurants' swipe fees

The bipartisan measure aims to lower the cost by fostering more competition among processors.
Swipe fees are now typically an operator's third-highest cost. / Photo: Shutterstock

Restaurants would be able to shop for lower credit-card processing fees under a bipartisan bill that was introduced in both chambers of the U.S. Congress on Wednesday.

The measure, the Credit Card Competition Act of 2023, aims to bring down what are now restaurants’ third-highest cost by fostering competition for the two dominant processors, the networks of MasterCard and Visa.

The finance giants’ cards are used in an estimated 80% of all transactions within the U.S. that involve a credit card. Merchants have long complained that they’re forced to use MasterCard and Visa’s processing networks for purchases involving the companies’ cards, leaving them no option but to pay whatever fees affiliated financial institutions might charge.

“The lack of competition means these two companies can effectively price-fix how much it costs restaurants to run a credit card,” the National Restaurant Association said in an announcement welcoming the Competition Act, without mentioning MasterCard or Visa by name.

According to merchant trade groups like the association, those “swipe fees” have more than doubled over the last decade.

The Competition Act would require any large financial institution that issues a MasterCard or Visa charge plate to allow at least two processors outside the issuing company’s network to move funds from customer to merchant. It defines a large bank as one with at least $100 billion in assets.

At least one of those choices would need to be unaffiliated with the MasterCard and Visa networks. The stipulation is intended to foster the startup and growth of alternative options whose reduced pricing leverage would likely translate into lower fees. The set-up, known as “dual routing,” is already in place for debit-card transactions, whose processing fees are typically lower than the swipe fees for credit-card charges.

“The Credit Card Competition Act would empower restaurant owners to choose the most cost effective and secure network to route a credit card transaction,” Sean Kennedy, EVP of public affairs for the NRA, said in a statement. “The impact of this would be significant – saving restaurant operators and consumers billions of dollars a year.”

The other major provision of the bill would block any credit card or processing network controlled by another nation from entering the U.S. market, a component intended to shield the domestic economy from foreign sway.

Restaurants have been striving for decades to bring down the fees they’re assessed for each swipe of a credit or charge card. In the 1980s, groups of operators even banded together in Boston and other cities to protest the charges.

A slightly different version of the 2023 Competition Act was introduced under the same name last summer.

But restaurateurs and other merchants have faced fierce resistance from the card companies and other stakeholders.

The newly introduced act drew immediate criticism from The Credit Union Association, a trade group for those financial institutions. It warned that the legislation would put consumers at greater risk of data theft because smaller institutions like the ones likely to be helped by the bill cannot provide the security of the big processing networks.

It also blasted the measure as a “big box bill” that would help retail giants like Target and Walmart to lower their costs of doing business without any benefits channeling down to customers.

“Interchange is the cost of doing business,” association CEO Jim Nussle said in a statement, using the technical name for swipe fees. “Merchants like Target and Walmart reap the benefits of credit card usage with immediate payments, protection from fraud, and typically larger purchases by consumers – but don’t want to pay the cost of accepting credit cards.”  

The act was introduced Wednesday in the Senate by Dick Durbin (D-Ill.) and Roger “Doc” Marshall (R-Kan.).

Its sponsors in the House of Representatives are Lance Gooden (R-Texas) and Zoe Lofgren (D-Calif.).

The bill has yet to be assigned to a committee in either chamber.

Neither MasterCard nor Visa responded to requests for comments by the time of this posting. 

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