Hearings to examine China's cybersecurity threat, focusing on big hacks and big tech.
Senate Subcommittee on Privacy, Technology, and the Law
2024-11-19
Source: Congress.gov
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Meeting of Senate Judiciary Committee will come to order. Over the past several years, the American people have suffered through a period of high inflation brought on by the COVID pandemic, which temporarily closed manufacturing plants and clogged supply chains. But there is a hidden contributor to the high prices we will pay on everything from furniture to eggs, credit cards, swipe fees. Every time an American consumer makes a purchase using a credit card. A swipe fee is taken out of the transaction amount and divided between the credit card network and the bank that issued the card. The biggest part of the swipe fee is called the interchange fee, which is set by credit card network and paid to the issuing bank. The credit card market is dominated by Visa and MasterCard. They control 83% of credit cards in this country. These networks can set interchange fees at seemingly whatever amount they wish. Retailers, restaurants, and other small businesses have no ability to negotiate these fees, which can run anywhere from 1% to 3% of the total bill. The only choice, if you want to call it that, they have is to accept Visa and MasterCard branded credit cards and pay the fee or refuse to accept the cards entirely which in this day and age is no choice at all for most retailers. Let's turn to a video that sheds light on this issue.
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Isaac Stone Fish Strategy Risks
But these two companies control over 80% of the credit card market. With scant competition, Visa and MasterCard have faced a little pressure to rein in swipe fees. The truth is, for the vast majority of Americans, the best deal might not come in the form of a new piece of plastic, but instead, a new piece of legislation.
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Sam Bresnick Center for Security and Emerging Technology (CSET), Georgetown University
In this room, during a Senate Judiciary Committee hearing held in 2006, in the 18 years since that hearing, American consumers have been charged a staggering $1.1 trillion in interchange fees. The vast majority of those fees, a total of $797 billion, came from credit card purchases. The remaining $320 billion, less than a third of the total, comes from debit cards. There's a simple explanation for that disparity. In 2010, the Senate voted to include what became known as the Durbin Amendment in the Dodd-Frank Act. The Durbin Amendment capped the interchange fees that card networks like Visa and MasterCard could set on behalf of large debit card issuing banks. This single reform is estimated to have saved consumers $6 billion, $6 billion in the first year after its implementation and billions more since. I want to salute a former staffer of mine, Dan Swanson, who's here today in the front row. He led me on this journey from the beginning, and I thank you for your service. Thanks for being here, Dan. Free of similar regulation in the credit card market, Visa and MasterCard duopoly virtually prints money on behalf of their big bank partners. In 2023 alone, Visa and MasterCard charge merchants more than $100 billion in credit card fees, mostly in the form of interchange fees. But help is on the way. In July of 2022, I joined my colleague, Senator Roger Marshall, who will speak to us this morning, to introduce the Bipartisan Credit Card Competition Act.
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