WASHINGTON — Merchants' latest hope to overhaul rules governing the "swipe fees" they pay to banks isn't likely to slide through with Congress' current must-pass piece of legislation, but the legislation's proponents say there's plenty of opportunity down the road for it to wind up on President Joe Biden's desk.
Banks have fiercely opposed the Credit Card Competition Act, which would require cards from banks with $100 billion or more of assets to offer merchants the choice of two unaffiliated card networks that aren't both Visa and Mastercard. While the bill's sponsors say it will lower fees and promote competition outside of the "Visa-Mastercard duopoly," advocates for the financial services industry say it's a giveaway to retailers and would increase costs for consumers.
The bill, led by Sen. Dick Durbin, D-Ill., has garnered more support on the Hill since it failed to gain traction last year. This time around, Durbin is joined by Sens. J.D. Vance, R-Ohio, a junior member of the Senate Banking Committee; Peter Welch, D-Vermont; and Sen. Roger Marshall, R-Kansas. Reps. Lance Gooden, R-Texas; Thomas Tiffany, R-Wis.; Jefferson Van Drew, R-N.J.; and Zoe Lofgren, D-Calif, are backing a House version.
Part of the bill's newfound popularity on the Hill is growing scrutiny of the banking sector in the aftermath of high-profile bank failures earlier in the year, including Silicon Valley Bank, said Doug Kantor, general counsel for the National Association of Convenience Stores and a member of the Merchants Payments Coalition, which includes many retailers lobbying for the bill.
"I think that's just reflective of a growing recognition that there are real problems with the way that credit card payments are happening now," Kantor said. "I think some of the banking difficulties earlier this year also remind people that trusting some of these banking institutions has not always worked well for us in the past. We need to sometimes take a look at what incentives they have or don't have, and how the system works."
Since Durbin and his group of bipartisan lawmakers
The legislation — alongside most bills — isn't likely to pass on its own in a divided Congress. That means it'll need to be passed alongside one of several "must-pass" pieces of legislation, such as the defense spending bill or the omnibus spending package, that are typically advanced on a bipartisan basis.
The most immediate opportunity to do so is in the defense spending bill, or the National Defense Authorization Act, that recently passed the House. The lawmakers would try to attach the amendment alongside a companion one that would require a study on the financial cost to military members from credit card interchange.
Durbin attempted this strategy last year with the same spending package, but to no success. This year's defense spending bill is now being debated in the Senate, where lawmakers can try to add amendments.
Despite growing support for the credit card bill among lawmakers, analysts say that the political calculus isn't right for the bill this year either.
Ian Katz, managing director at Capital Alpha Partners, said that it would be a major blow for banks should the credit card bill get attached onto a larger vehicle like the NDAA, but that it's unlikely at this point.
"Too many lawmakers don't want to vote on that issue at all. The bank groups keep the pressure on — even if they don't think the chances of passage are good — because they see it as something that would be a significant negative for a lot of banks," he said.
Bank groups have framed the credit card bill as a giveaway to large retailers who have increased prices while reporting record profits, said Jaret Seiberg, managing director and financial policy analyst at Cowen.
This framing is "especially effective as it forces lawmakers who back the amendments to align themselves with higher retail prices," he said.
And the NDAA was passed along unusually partisan lines in the House, so this might not be the year to attach the credit card interchange bill, which is only tangentially related to defense spending.
"House Republicans have so politicized the bill that the only way for it to pass is for leadership to drop all contentious amendments," Seiberg said. "That would include interchange."
Bank groups, including the Bank Policy Institute, American Bankers Association, Independent Community Bankers Association and Consumer Bankers Association,
"Both proposals are complex and flawed and in need of the scrutiny of regular order in the respective committees of jurisdiction," the banking groups said in the letter. "These highly-contentious and divisive amendments directly involve the interests of various committees with judicial, federal prudential, and international trade oversight."
That said, there are a number of other instances where the credit card bill could be added to a must-pass piece of legislation in the coming year. The farm bill, for instance, which lays out spending for much of rural America-focused initiatives, food stamp programs, and a myriad of other initiatives, is up for its five-year renewal in the second half of 2023.
"There's continued to be a lot of things coming up in the House that are maybe not just business as usual, so all of that means there's probably more uncertainty than there would be about what may come up when," Kantor said. "It's clear there's a lot of interest in the legislation and a lot of momentum for it, so certainly we take that as a helpful sign."
