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“Today, in addition to cash, checks and traditional US payment networks, we also compete in digital wallets, buy-now-pay-later solutions, fintech and big tech, real-time payment systems and cryptocurrency,” said Bill Sheedy, a senior advisor at Visa CEO Al Kelly, at the hearing. “Regulatory intervention focused solely on card networks would shift consumer spending away from networks like Visa and toward more expensive payment methods with more risk, less reliability, and less protection and security.”

The hearing was convened to interview executives from credit card companies, banks and retailers, and consumer advocates on the potential impact of regulating credit card interchange fees. Visa and Mastercard an increase planned in fees since 2020, a move delayed by the pandemic and protests from traders.

The Durbin Change, passed in 2011, limits debit card interchange fees to 22 cents plus 0.05% of the transaction fee. However, in the United States there are no regulations on credit card interchange fees. Some members of the Judiciary Committee were concerned about the impact of high fees on top of inflation on everyday consumers and small businesses, while others feared that capping credit card companies’ interchange fees could reduce competition and consumer options in the market.

At the end of the hearing, there was no clear consensus on how or if Congress should cap interchange fees. However, the question-and-answer session helped highlight how Congress could regulate a revenue stream that is vital to a burgeoning industry.

Most senators on the committee were quick to dismiss Visa and Mastercard’s oft-repeated claims of increased fintech competition, with Senator Richard Blumenthal calling this “apples and oranges.” But some of Visa and Mastercard’s other arguments seem to have carried more weight.

Executives said the fees are reasonable given the fraud protection, rewards, convenience and increased purchasing power they offer consumers. Fees rose accordingly as cybersecurity risk increased during the pandemic, for example after issuers said they needed to devote more resources to fraud protection. Visa and Mastercard executives also repeatedly referred to a report by the Government Accountability Office that said the Durbin Amendment reduced the availability of financial services to the unbanked, which seems to have worried some senators.

But consumer advocates and retailers vigorously rejected these claims. The GAO study is a flawed “survey” with misleading questions, he said Doug Kantor, General Counsel of the National Association of Convenience Stores. Laura Shapira Karet, CEO of grocery chain Giant Eagle, pointed out that Visa and Mastercard control over 80% of the market and engage in a duopoly by setting flat-rate exchange fees. Ed Mierzwinski, senior director of the Federal Consumer Program at US-PIRG, quoted Visa’s chief financial officer in a recent conference call on the findings that inflation is a “net-net gain” for the company because interchange fees are considered Part of the total amount collected would be gross receipts.

The most obvious regulatory move would be for Congress to write something similar to the Durbin Amendment for credit card transactions and enact a cap on transaction fees. But senators also made other suggestions. Sen. Mazie Hirono, for example, asked whether removing the so-called “honor all cards” rule would increase competition. The rule is part of many credit card issuers’ contracts with merchants, and requires merchants to accept any credit card offered by an issuer. These include premium rewards cards with higher fees, which companies like Visa and Mastercard encourage well-heeled consumers to spend more on, which ultimately benefits retailers.

Sen. Amy Klobuchar asked if better antitrust enforcement could fix the problem. Consumer advocates said it would help, but there were also major loopholes in existing legislation. “This is an area where the Justice Department’s Antitrust Division has been active over time, as has the Federal Trade Commission, but there is much more work to be done,” Kantor said.

“Very good,” Klobuchar replied.

Correction: A previous version of this story misspelled the name of Ed Mierzwinski and an instance of the Durbin Amendment. This story was updated on May 4, 2022.

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