Eight trade groups representing banks and credit unions have announced their opposition to a bipartisan House bill from Reps. Lance Gooden, R-Texas, and Peter Welch, D-Vt., that has emerged as the latest flashpoint in the fight over swipe fees.
The bill, a companion to
The legislation is meant to reduce the pricing leverage that the largest payment networks' have over swipe fees, which are paid by merchants who accept credit cards. Swipe fees in the United States, also known as interchange fees, are among the highest in the world because of Visa and Mastercard's control of the market, according to the legislation's sponsors.
But the banking industry groups argued in a letter to congressional leaders that the bill would "prioritize big box retailers over consumers."
Signing on to the letter were the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Credit Union National Association, the Electric Payments Coalition, the Independent Community Bankers of America, the National Association of Federally-Insured Credit Unions and the National Bankers Association.
"Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and benefit big box retailers by reducing the number of credit card issuers competing for consumers' business, removing a consumer's choice of preferred card network, wringing out the competitive differences among card products, limiting popular credit card rewards programs, and putting the nation's private-sector payments system under the micromanagement of the Federal Reserve Board," the groups wrote in a letter to House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif.
"The Gooden-Welch bill accomplishes this by using legislation to circumvent the free market to award private-sector contracts to a small handful of the sponsors' favored payment networks in order to pad the profits of the largest ecommerce and multi-national retailers who are raising prices on American families far more than the real rate of inflation."
The banking groups argued that retailers, which don't have the same kind of examinations and regulations over privacy, data security and fraud prevention as banks, are more prone to breaches. Under the proposed legislation, banks and other financial firms would end up covering the costs associated with breaches, the groups said.
"Banks and credit unions cover a consumer's costs when fraud occurs," the groups said in the letter. "Any reduction in interchange fees will directly affect bank and credit union investment in fraud management systems and processes that are dedicated to reducing fraud risk in the system — forcing institutions to increase costs to cover these necessary expenses."
While the bill only applies to banks with more than $100 billion in assets, banking trade groups say that it would also hurt smaller banks.
"The measure would require all banks — including Main Street community banks—to subsidize the costly and burdensome changes it would impose on the payments system," the ICBA said in a statement last week. "This not only refutes the sponsors' claims that their plan would help community banks, it also risks driving small issuers to exit the credit card business altogether — limiting access in local communities."
