Credit Card Competition Act Introduced in US Senate

A bill has been introduced in the US Senate seeking to drive down merchant fees by increasing competition among US credit card networks.

In late July, Sen Dick Durbin (D-Illinois) and Senator Roger Marshall (R-Kansas) introduced the Credit Card Competition Act, a bill which seeks to drive down merchant fees by increasing competition among US credit card networks, weakening Visa’s and Mastercard’s market dominance.

Mr. Durbin championed a similar rule for debit cards which resulted in the 2010 Durbin amendment to the Dodd-Frank law.  It requires that merchants have the ability to choose from at least two unaffiliated debit-card networks when routing transactions.

The Credit Card Competition Act directs the Federal Reserve to issue regulations covering issuing banks with over $100 billion in assets.  Under the proposed regulations, these banks will not be allowed to 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 cannot be one of the two largest networks.  Merchants will have the right to choose the network through which their payments are processed.

The bill will likely be referred to the Senate Banking Committee because it would amend the Electronic Fund Transfer Act.  Neither Durbin nor Marshall is on the Banking Committee, and it is unclear whether the Senate Banking Committee will take up the bill. Many analysts are skeptical the bill will become law and predict consumers will experience higher card fees and less generous reward programs if it does become law.

For more information about the legislation, see this Wall Street Journal article.   For analysts’ views regarding the legislation, see this MarketWatch article.

Verisave is a third-party cost-reduction firm specializing in merchant accounts and credit card processing fees.

Verisave is not a payment processor, and is not affiliated with any processors, card brands, or banks.

Verisave has more than 20 years of experience optimizing and monitoring the credit card processing industry.

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