Group aiming to lower swipe fees steals a page from the opposition's playbook

Restaurants and their allies argue that a bill intended to reduce processing charges would enhance data security, not undermine it.
A bill aimed at bringing down processing fees would enhance data security, not hamper it, an industry coalition contends. | Photo: Shutterstock

Mastercard and Visa say credit-card processing fees have soared to their current levels because far stronger measures are needed today to safeguard users’ personal data. Now restaurants and their allies are citing heightened security concerns as the very reason Congress should put a rein on the financial giants.

A coalition that’s been striving for more than a decade to temper swipe fees has begun airing TV ads that warn of a dire security risk if credit-card legislation currently before Congress should fail to pass. The Credit Card Competition Act calls for compelling Visa and Mastercard to allow charges on their credit cards to be processed by at least one alternative to the two giants’ networks, which are believed to handle about 80% of transactions. Restaurants and other merchants could then choose which processor to use.

The aim is to foster competition and thereby bring down rates, or at least temper further increases. Swipe fees—the costs levied for channeling to merchants what customers charge on cards—have roughly doubled over the last decade, with affected industries citing a lack of competition as the reason. Mastercard and Visa can essentially dictate their rates, according to their adversaries on the issue.

The processing charges are now restaurants’ third biggest expense, behind labor and food but ahead of significant line items like occupancy costs and utility charges, according to the National Restaurant Association.

The Credit Card Competition Act would require that Mastercard or Visa charges be clearable through a third party, but it specifies that the alternative processor cannot be one that’s controlled by a foreign government. The stipulation appears to be aimed at China UnionPay, the network that is owned by the People’s Republic of China.

“The prohibition would keep banks from exposing Americans’ sensitive financial data to foreign governments by routing U.S. credit card transactions over foreign networks,” the Merchants Payment Coalition said in announcing its new ad campaign.

It asserts that Mastercard and Visa have been striving since 2010 to strengthen connections to China UnionPay, a financial behemoth in Asia.

The National Restaurant Association is a member of the Coalition, along with the National Association of Convenience Stores, the National Grocers Association and the National Retail Federation.

In previewing the new ad, the Coalition also stressed that the Credit Card Competition Act would not wipe out whatever points or other credits consumers have amassed through card loyalty programs, as some opponents have asserted. During visits last week on Capitol Hill, restaurateurs heard their elected officials voice fears of a backlash if they voted for the bill and it wiped out constituents’ airline mileage points.

Passage of the Credit Card Competition Act was a major focus of the Congressional lobbying blitz the restaurant association coordinated with its state affiliates and their members last week. Nearly 600 operators met with their elected representatives during the Public Affairs Conference to muster support for the bipartisan bill.

The day before the restaurateurs descended on Congress, a credit-card trade group called the Electronic Payments Coalition blanketed congressional offices with its arguments against legislating changes in the way card charges are processed. It accused the National Restaurant Association by name of spreading mistruths about the situation to further the financial interests of the association’s members, referring to the Credit Card Competition Act as the Durbin-Marshall bill.

“The National Restaurant Association's lobbyists will even tell you the alternativenetworks Durbin-Marshall will force tens of millions of credit cards to run on arejust as safe as the current networks,” the communication stated.

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