Love your credit card points? A bill that may change them is still on the table

A Senate bill that takes aims at credit card “swipe fees” won’t make it into annual defense policy legislation, but sponsors of the Credit Card Competition Act struck a deal with leadership to have it come to the floor for a vote by the end of the year, a source close to the talks told The Hill.

“We were given assurances that the Credit Card Competition Act will be given a vote this Congress,” Sen. Roger Marshall (R-Kan.), who reintroduced the bill last month with Senate Majority Whip Dick Durbin (D-Ill.), confirmed in a statement. 

The bill would require financial institutions with assets of more than $100 billion to enable at least two network options for processing credit card transactions.

At least one of those networks must be an option other than Visa or Mastercard, which control a combined 80 percent of the credit card network market in the U.S. 

The National Retail Federation (NRF), one of the major players championing the bill, says swipe fees are the highest operating cost after labor for most retailers.

The current average fee for credit card transactions is around 2 percent, and the retail trade association estimates credit card swipe fees cost retailers more than $160 billion each year.

What are bill sponsors wanting in a swipe fee law?

The bill does not cap fees. Rather, the bill’s sponsors say more competition and choice will reduce credit card swipe fees.

“We will inject competition into the credit card market, without price controls, and help our MainStreet businesses and consumers. The days of globalists on Wall Street taking advantage of American families will soon be over,” Marshall said.

The chamber is slated to vote on the National Defense Authorization Act before the August recess, and there had been talk of tagging the swipe fee bill onto the must-pass legislation. But when Durbin announced Sunday he tested positive for COVID for the third time this year, that plan became increasingly less likely.

With Durbin quarantined away from Capitol Hill, Marshall continued to push for the amendment. In a statement, the Electronic Payments Coalition accused Marshall of holding up the national defense spending authorization bill to “gift a massive government handout to Walmart, Target, and other big-box retailers.” 

Visa and Mastercard are members of the coalition, which vehemently opposes the bill, along with other banking giants — including Capital One, Wells Fargo and the American Bankers Association.

“This is going to enrich the bottom lines of the big box retailers at the expense of individual consumers and at the expense of the nearly 10,000 community financial institutions, the community banks and credit unions that helped make up the payments ecosystem,” said Aaron Stetter, executive director of the Electronic Payments Coalition, in a phone interview.

When might a swipe fee bill come to a vote?

Banks say swipe fees are essential to fund the “points” programs that have become a staple for credit card users. But when consumers might actually see a change is still up in the air.

“I think it’s more clear that there will be a vote and people will have to vote on it. The only question is: when?” said Doug Kantor, general counsel at the National Association of Convenience Stores, in a phone interview.

Kantor is also an executive committee member of the Merchant Payments Coalition of convenience stores, supermarkets and other businesses that support the bill.

Some research has indicated the hit to points programs may be minor.

An analysis by the advisory firm CMSPI, which aims to “boost the productivity of the retail payments ecosystem,” found that if the bill passes, credit card rewards would reduce by less than one-tenth of 1 percent “at most.”

The Electronic Payments Coalition decried that analysis as “misleading,” pointing to a Federal Reserve study on credit card profitability that found net transaction margins have shrunk as reward expenses increased. The coalition says this demonstrates there is no “wiggle room” for issuers.

“If that revenue is eliminated, they are not going to continue these programs,” Stetter said.

Callum Godwin, chief economist at CMSPI, told The Hill their estimate carved out third-party card networks like American Express and Discover, who are exempted from the Credit Card Competition Act requirements.

He also noted the bill would impact only the 23 U.S. card issuers with assets higher than $100 billion, based on large commercial bank asset data released by the Federal Reserve in March.

Banks are competing for customers as credit markets tighten

Stephanie Martz, chief administrative officer and general counsel at the NRF, pointed out that banks would still be competing with one another for customers.

“They’re going to need to keep their rewards programs or figure out what enticements they’re going to use so that people use their credit cards,” Martz said in a phone interview.

This isn’t the first time Congress has moved to rein in card processing fees.

The so-called Durbin Amendment to the Dodd-Frank Act in 2010 directed the Federal Reserve to cap swipe fees for debit cards issued by the largest banks at 21 cents per transaction plus 0.5 percent of the total transaction amount.

Durbin and Marshall introduced the Credit Card Competition Act last year, but their attempt to attach it to the Senate’s version of the NDAA was unsuccessful.

Sens. Peter Welch (D-Vt.) and JD Vance (R-Ohio) signed on as co-sponsors for the swipe fee bill this time around, and the source close to talks believes they will have the votes when the bill is called to the Senate floor. 

“Prices for gas and groceries are skyrocketing especially in rural America. We need to do all we can to drive down costs, and our legislation will do just that. We are looking forward to getting this bipartisan bill passed together in the near future,” Marshall said.