The National Federation of Independent Business (NFIB), the small-business advocacy organization, has announced that it has sent letters of support for H.R. 8874 and S. 4674, both known as the Credit Card Competition Act of 2022. These identical pieces of legislation, introduced in the U.S. House of Representatives and the U.S. Senate, would allow small businesses the ability to choose between at least two credit card network options to process transactions.
“The Credit Card Competition Act of 2022 would inject much-needed competition into the credit card processing market by allowing small businesses the freedom to choose between multiple processing networks,” says Jeff Brabant, NFIB’s director of federal government relations.
“This legislation injects competition into the credit card processing market and reins in rapidly rising ‘swipe fees’ charged to small businesses that accept credit cards,” continues Brabant. “It will harness the power of competition to give small business owners real choices when it comes to credit card processing networks. This competition will force networks to compete for business the same way that small businesses must compete for customers every day.”
The bipartisan Credit Card Competition Act of 2022 was introduced earlier this summer by U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Roger Marshall, M.D. (R-KS). It would direct the Federal Reserve to ensure that credit card-issuing banks offer a choice of at least two networks over which an electronic credit transaction may be processed, with certain exceptions.
“Credit card swipe fees inflate the prices that consumers pay for groceries and gas. It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly,” said Durbin. “This legislation, which builds upon pro-competition reforms Congress enacted in 2010, would give small businesses a meaningful choice when it comes to card networks, and it would enable innovators to gain a foothold in credit cards. Bringing real competition to credit card networks will help reduce swipe fees and hold down costs for Main Street merchants and their customers.”
“When it comes to Main Street vs Wall Street, I’ll choose Main Street every time,” said Marshall. “Convenience stores, gas stations and other small businesses … are being taken advantage of by Visa and MasterCard on behalf of big banks in New York City at a time when they, and the communities they serve, are grappling with crippling inflation and staring down the barrel of a looming recession. It’s gone on long enough. Competition is the heartbeat of capitalism and that is what our bill will create, competition.”
Under the Credit Card Competition Act, the Federal Reserve would issue regulations, within one year, ensuring that banks in four-party card systems that have assets of over $100 billion cannot restrict the number of networks on which an electronic credit transaction may be processed to less than two unaffiliated networks, at least one of which must be outside of the top two largest networks. This would inject competition into the credit card market – opening the door for new market entrants such as current debit-only networks, encouraging innovation and enhanced security, creating backup options if a network crashes, and exerting competitive constraints on Visa and Mastercard’s fee rates.