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  • Writer's pictureStaff @ LPR

Credit Card Deal Makes Durbin Bill Irrelevant

Visa and Mastercard have come to terms with an estimated $30 billion settlement aimed at reducing credit and debit card fees for merchants. This settlement, if approved by the courts, would mark one of the largest in U.S. history, potentially leading to lower prices for consumers as some of the savings trickle down.

The settlement stems from long standing allegations by merchants that Visa and Mastercard have been charging excessive swipe fees, also known as interchange fees, and enforcing anti-steering rules that prevent them from directing customers towards cheaper payment options. Swipe fees typically consist of fixed fees along with a percentage of the total sale amount, averaging between 1.5% to 3.5% per transaction.

Under the terms of the settlement, both Visa and Mastercard would decrease swipe rates by a minimum of four basis points over three years, guaranteeing an average rate that is seven basis points lower than the current average for five years. Additionally, the settlement includes caps on rates for the same duration and the removal of anti-steering provisions. This allows merchants more flexibility to offer discounts or surcharges on transactions based on interchange fees.

While the settlement is substantial, some critics argue that it might not provide sufficient relief, suggesting that the savings could be temporary and that fees might remain high. Nevertheless, Visa and Mastercard have emphasized that the settlement addresses concerns raised by small businesses.

Experts argue that with the settlement, the Credit Card Competition Act of 2023, which aimed to address similar issues of credit card fees and competition, may no longer be necessary given the significant strides made as a result of the changes. With the reduction in swipe rates, caps on fees, and removal of anti-steering provisions, the competitive landscape in the credit card industry could see significant improvement without the need for additional legislation. Senator Durbin’s legislation should at the very least be delayed - if not disregarded altogether - until the market has time to respond to the new changes as a result of the settlement. With this new settlement, lawmakers should be encouraged more than ever to keep their hands off of consumers’ rewards.


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