In the early 1900s, one of the most iconic Republican presidents of our time, Teddy Roosevelt, made history by tackling the megacorporations taking advantage of consumers, small businesses, and families. Appropriately named the "Trust Buster," Roosevelt began a populist movement among Republicans that prioritized fairness for the working family and Main Street businesses.
It’s time to bust the credit card duopoly and make credit cards competitive again. The credit card industry is dominated by Visa and MasterCard, and the amount merchants have paid for fees levied to process their transactions more than doubled from $65.1 billion in 2011 to $137.8 billion last year. Capitalism without competition creates opportunities for unfairness and exploitation, especially in times of crisis.
Dozens of Main Street retailers and grocers brought to my attention the opaqueness of their credit card fees and the looming fee increases. As fuel prices began to soar, convenience stores and gas stations echoed their sentiments. With razor-thin margins, wholesale inflation at over 11%, supply chain disruptions, and the unavailability of labor, Kansas consumers are spending an extra $700 a month due to inflation, and retailers are facing solvency problems. With gross domestic product contracting for a second straight quarter, falling 0.9% from April to June, this recession will further affect Main Street and all retailers.
Despite the destruction that President Joe Biden’s agenda is doing to our economy, credit card companies raised their fees once again — ignoring a letter from Sen. Dick Durbin (D-IL) and myself. The average family already spends about $900 a year on swipe fees. The problem of no competition affects the pocketbooks of hard-working people.
I hate government interference as much as anyone. As a businessman, I’ve personally lived through the nightmare of implementing the Affordable Care Act and the Dodd-Frank Act. Those bills were government interference at their finest and were not intended to increase competition or decrease prices.
The public deserves the benefits of a credit marketplace subject to a normal, healthy competitive market that provides more options for retailers and customers alike, which is why I introduced the Credit Card Competition Act with Durbin. My legislation is not price control legislation; this is competition legislation.
Currently, credit cards issued by Visa and MasterCard are only processed over their own respective networks. The banks that issue these cards then demand arbitrarily high swipe fees the card companies set.
Our legislation encourages competition by requiring multiple routing networks on all cards issued by the country’s largest banks. Furthering our commitment to increasing competition, it will be the local bank that issues the credit card that gets to decide which new network to choose. Research shows this change, bringing routing choice to credit cards, could save businesses and communities $11 billion a year.
As for community banks, the backbone of financing for small businesses, they will have increased opportunities to enter the credit card issuing market as we’ve excluded banks of less than $100 billion in assets. Our bill also preserves the security of our financial system by forbidding 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 providing security for their customers. Independent networks have the technology and security features needed to process these transactions safely and with speed; they just haven’t been given the chance to compete.
Competition is the heartbeat of capitalism, and that is what the Credit Card Competition Act will provide. A fairer market environment will lower 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.