The Senate Judiciary Committee publicly questioned the recently-raised swipe fees charged by both Visa and Mastercard during a hearing on Wednesday, calling for new rules to curb "unreasonable" fees. File Photo by Peter Foley/EPA
May 4 (UPI) -- Members of the Senate Judiciary Committee called Wednesday for new rules to rein in "unreasonable" swipe fees charged by credit companies Visa and Mastercard.
Committee chairman Dick Durbin chastised both companies for recently raising the user fees they charge, which are passed on to consumers.
"Americans are rightly worried about inflation and rising prices. What they may not know is that swipe fees contribute to this problem.
"When swipe fees on credit & debit cards go up, like they did just two weeks ago, it increases inflationary pressures-and consumers pay the price," the Illinois senator wrote on Twitter.
Both companies changed their interchange fees April 22. The payments are added to every credit card transaction to compensate issuing banks and fund consumer rewards and anti-fraud measures.
"The credit and debit card systems are not competitive marketplaces," Durbin said during the committee meeting.
"It's a sweetheart deal for the dominant networks, for the biggest banks and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price."
While larger companies may be able to negotiate lower fees with the credit card companies, smaller or independent businesses have no such leverage.
"Merchants and customers take it on the chin. What can merchants do to keep the fee rates down? Not much," said Durbin.
"Bottom line, when fees go up it costs more to use money and that cost gets billed into prices consumers pay. Visa and Mastercard raised their swipe fees two weeks ago despite bipartisan opposition from Congress."
Democrats say the fees hurt low-income Americans the most.
Visa and Mastercard control roughly 80 percent of the credit and debit market between them.
"The CMSPI estimates that the total impact of these [swipe fee] changes are $475 million in annual increases," the Retail Industry Leaders Association said in a statement.
"Bringing the whole picture together, $475 million from Visa and Mastercard is added to the changes that went into effect last year from Visa, which CMSPI estimated to be worth $698 million, and a grand total of $1.17 billion in increased fees for merchants annually."
Retailers also took aim at the credit card companies during the hearing.
"When the price of goods go up, what's happening is the credit card companies are getting a higher percentage on a higher sale. So that means there's more costs that we have to bear and pass along to our customers," Giant Eagle supermarket CEO Laura Shapira Karet told the panel.