Durbin Discusses Interchange Fees With Federal Reserve Chairman Jerome Powell

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL) today spoke with the Chairman of the Federal Reserve, Jerome Powell, to receive an update on the status of economic and monetary policy in the U.S.  During the meeting, Durbin stressed the importance of ensuring that the biggest banks and card networks fulfill their obligations to charge reasonable and proportional interchange fees for debit card transactions—and protect consumers, who pay these hidden fees in the form of higher retail prices, and merchants, who are unable to negotiate fees with the dominant card networks.  As author of the “Durbin Amendment,” Durbin received an update on the Fed’s Regulation II proposal, which sets the cap for debit card swipe fees that banks and networks can charge merchants and that are ultimately passed on to consumers.  Regulation II has not been updated in more than a decade even though debit transaction costs have decreased by almost half since 2011.

They also discussed Durbin’s Credit Card Competition Act, bipartisan legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly.

“At a time when hard-working Americans and small business owners are struggling with higher costs of everyday essentials like gas and groceries, we should be doing everything we can to reduce prices—and we can start by reducing the cost of swipe fees,” Durbin said.  “During today’s call, Chairman Powell and I discussed how the Fed plans to address costly interchange fees—such as through the Fed’s updated Regulation II proposal—and I look forward to hearing about future developments as it is implemented.”

In Congress, Durbin has made it a priority to protect consumers through legislation such as the Credit Card Competition Act.  Building off of debit card competition reforms enacted by Congress in 2010, the Credit Card Competition Act would direct the Federal Reserve to ensure that the largest credit card-issuing banks offer a choice of at least two networks, one of which must be a network other than Visa and Mastercard, over which an electronic credit transaction may be processed. 

Visa and Mastercard wield enormous market power in credit cards; according to the Federal Reserve, they account for nearly 576 million cards, or about 83 percent of general-purpose credit cards.  Visa’s and Mastercard’s market power and network structure have enabled them to impose fees on U.S. merchants that are among the world’s highest, charging more than $101 billion in U.S. merchant credit card fees in 2023. These fees include interchange fees which Visa and Mastercard require merchants to pay to issuing banks, as well as network fees that Visa and Mastercard require merchants to pay directly to them.  Consumers ultimately pay for all of these fees in the price of the goods and services they buy.