Senator: Reform Unfair Credit, Debit Card ‘Swipe Fees’

Sen. Dick DurbinA leading Democratic senator wants the Federal Reserve to determine if interchange fees –  charged businesses every time a customer uses a credit or debit card – are “reasonable and proportional” to the costs of a transaction.
Sen. Dick Durbin, D-Illinois, said he will be introducing an amendment this week calling for the first restrictions on the controversial “swipe” fees that merchants have to pay MasterCard and Visa – ranging from 1 percent to 3 percent of the transaction cost. As majority whip, Durbin has the second-highest leadership post in the Senate.
Visa and MasterCard pass along those fees to the banks that issue their cards. About $50 billion in interchange fees was collected in 2008, with about 80 percent of that money going to just ten big banks, Durbin said.
Durbin said he will introduce the bill this week as part of the overall financial oversight reform legislation under debate. Last week, the Senate approved a landmark oversight framework for the orderly dismantling of failing financial firms deemed to pose a threat to the economy.
Durbin said his amendment would also remove “anti-competitive provisions” from Visa and MasterCard contracts that would allow merchants to offer discounts for using one card or the other – if they choose to do so. 
“American businesses and consumers are getting nickled and dimed by the big banks, who end up making billions from these hidden fees,” Durbin said. “Interchange fees need to be fairly and transparently negotiated between the merchants and the credit card companies who represent the banks’ interests so working Americans don’t get shortchanged.”
Tighter regulatory intervention is needed, Durbin said, because Visa and MasterCard unilaterally set interchange fee rates that apply to all banks within their card networks.
“There is no negotiation between banks and merchants over reducing interchange rates.  In fact, Visa raised many of its debit fees by 30 percent just last month,” Durbin said.
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One thought on “Senator: Reform Unfair Credit, Debit Card ‘Swipe Fees’

  • May 12, 2010 at 11:44 am

    Does Durbin realize he’s going to give the big banks more power by taking away interchange from credit unions and small banks? My guess is not.

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