In the early 1900s, one of the most iconic Republican presidents of our time, Teddy Roosevelt, made history by taking on megacorporations that profited from consumers, small businesses and families. Aptly named the “Trust Buster”, Roosevelt started a populist movement among Republicans that prioritized fairness for the working family and Main Street businesses.
It’s time to break the credit card duopoly and make credit cards competitive again. The credit card industry is dominated by Visa and MasterCard, and the amount merchants paid for fees collected to process their transactions more than doubled, from $65.1 billion in 2011 to $137.8 billion. dollars last year. Capitalism without competition creates opportunities for injustice and exploitation, especially in times of crisis.
Dozens of Main Street retailers and grocers have drawn my attention to the opacity of their credit card fees and impending fee increases. As fuel prices began to soar, convenience stores and gas stations echoed their sentiments. With razor thin margins, wholesale inflation above 11%, supply chain disruptions and unavailability of labor, Kansas consumers are spending $700 more per month due to the inflation, and retailers are facing solvency problems. With gross domestic product contracting for a second consecutive quarter, down 0.9% from April to June, this recession will further affect Main Street and all retailers.
Despite the destruction President Joe Biden’s program is doing to our economy, credit card companies have again hiked their fees – ignoring a letter from Sen. Dick Durbin (D-IL) and myself. The average family already spends about $900 a year on sweeping fees. The problem of lack of competition affects the wallets of hard workers.
I hate government interference as much as anyone. As a businessman, I have personally experienced the nightmare of implementing the Affordable Care Act and the Dodd-Frank Act. These bills were government interference at its best and were not intended to increase competition or lower prices.
The public deserves the benefits of a credit market subject to a normal and healthy competitive market that provides more options to retailers and customers, which is why I introduced the Credit Card Competition Act with Durbin . My legislation is not price control legislation; it’s competition law.
Currently, credit cards issued by Visa and MasterCard are only processed on their own respective networks. The banks that issue these cards then charge arbitrarily high swipe fees that the card companies set.
Our legislation encourages competition by requiring multiple routing networks on all cards issued by the largest banks in the country. Continuing our commitment to increase competition, it will be the local bank issuing the credit card that will decide which new network to choose. Research shows that this change, which provides routing choice for credit cards, could save businesses and communities $11 billion a year.
As for community banks, the backbone of small business financing, they will have more opportunities to enter the credit card issuing market, as we have excluded banks with less than $100 billion from assets. Our bill also keeps our financial system secure by prohibiting networks funded or sponsored by foreign governments, such as China Union Pay, from entering this market. Visa and MasterCard are not the only companies capable of ensuring the security of their customers. Independent networks have the technology and security features to process these transactions quickly and securely; they just didn’t get a chance to compete.
Competition is the heart of capitalism, and that is what the Credit Card Competition Act will provide. A fairer market environment will reduce costs for small businesses and consumers, lead to more innovation and create a more robust payments market.
Roger Marshall is the junior senator from Kansas.