MasterCard Resists Senate's Merchant Fee Cut

Card group says Durbin amendment to financial reform bill will lead to higher payment card costs and less choice for consumers.

The Senate's approval Thursday of an amendment that would curb the fees card issuers charge merchants for card transactions would change the mathematics of card profitability, and MasterCard, for one, is not accepting it sitting down.

The card company says the Senate amendment would reduce competition and hurt consumers, and is "designed to increase profits for big box merchants at considerable expense to consumers, community banks, and credit unions."

The amendment, which was offered by Senator Dick Durbin (D-IL), "attempts to regulate the operation of debit card networks by shifting costs from big box merchants to consumers," said MasterCard representatives in a statement. "The Durbin amendment would give lobbyists for big retailers what they have been unable to achieve through other efforts – the ability to maintain all the benefits they receive from debit card acceptance while transferring the cost to consumers.

According to MasterCard, the Australian government tried a similar move with disastrous results. "Consumers ended up paying more for their payment cards, and there appears to be no evidence that merchants have passed on any savings to consumers as a result of artificially reduced interchange fees," the card group says.

The Durbin amendment would also provide merchants greater flexibility to use discounts to encourage consumers to use different forms and brands of payment. "MasterCard rules already allow merchants to discount for cash, check, debit and competing brands, but few merchants choose to use this option to reduce costs for consumers," the card organization says. The amendment would also allow merchants to set minimum and maximum transaction amounts for the use of payment cards, but not require disclosure of these limits.

The Independent Community Bankers of America and the Credit Union National Association have also opposed the amendment, saying it would “significantly harm thousands of community banks and credit unions that offer debit and credit cards to their customers and members.” Small business organizations such as the National Black Chamber of Commerce and the Latino Coalition have also expressed their opposition directly to Senators.