Financial Protection

Senate hearing on “swipe fees” charged merchants to include airlines: “credit card companies that fly planes”

Senator Dick Durbin (D-IL), chairman of the Senate Judiciary Committee, has demanded that the CEOs of American  and United Airlines join Visa and Mastercard to testify at an April 9th hearing on PIRG-backed legislation on credit-card swipe fees. Senator Durbin leads a bi-partisan House-Senate coalition in support of the PIRG-backed Credit Card Competition Act (S1838/HR 3881). Committee news release from Senator Durbin says bill opponents claim it would “ban” card rewards points programs.

Visa, Mastercard, and its allies have spent millions of dollars opposing my Credit Card Competition Act, including through false and misleading advertising claiming the bill would ‘ban’ credit card rewards programs. 

The news release goes on:

“At the same time, both American Airlines and United Airlines have aggressively opposed efforts to bring competition to the credit card market in order to protect the billions of dollars in windfall profits their companies collect through their co-branded credit cards.  These airlines have become credit card companies that fly planes.”

Recently,  Senator Durbin and lead Senate co-sponsor Dr. Roger Marshall (R-KS) sent a letter asking “the U.S. Department of Transportation (DOT) and the Consumer Financial Protection Bureau (CFPB) about the actions they are taking to protect consumers against unfair and deceptive practices in airlines’ frequent flyer and loyalty programs.”

PIRG stepped up its fight for the Credit Card Competition Act when it published an oped urging support for the bill. As the oped explains:  We need to “unmask” the “swipe fees that the credit card industry charges merchants but that are so large they get baked into the prices of everything” that consumers buy.

We called for swift passage of the Credit Card Competition Act, a commonsense bipartisan bicameral bill that will indirectly protect U.S. consumers — and directly protect small businesses — from unfair credit card fees. In response to the anti-competitive practices of Visa and Mastercard that affect Americans of all demographics, in “red” and “blue” states alike. Its Senate sponsors are Sens. Dick Durbin (D-IL),  Roger Marshall (R-KS), Peter Welch (D-VT), J.D. Vance (R-OH) and Josh Hawley (R-MO). The House sponsors are Democrat Rep. Zoe Lofgren of California and Lance Gooden (R., Texas), Tom Tiffany (R., Wisconsin) and Jeff Van Drew (R., N.J.).

Merchants pay swipe, or interchange, fees to accept credit and debit cards and are forced by card network rules to pass the costs on to all consumers, including cash customers. The swipe fees baked into higher prices at the store and at the pump primarily benefit more affluent rewards cardholders. As I told the Senate at a Judiciary Committee hearing last year, the big banks are happy with inflation — when gas prices double, their percentage-based swipe fee revenue doubles — without the banks making anything or doing anything.”

No, that’s not just me talking. On a recent earnings call to investors, Visa’s chief financial officer said that “inflation has ‘net-net’ been ‘a positive’ for the company.”

The diverse coalition that supports the bi-partisan bill includes the Merchants Payment Coalition and the National Association of Convenience Stores, labor groups including the Teamsters, and consumer and anti-monopoly groups from U.S. PIRG and Americans for Financial Reform to the American Economic Liberties Project and the Institute for Local Self-Reliance.

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