Representatives from Visa and Mastercard at the hearing denied raising interchange fees across the board, saying they raised fees on some transactions while lowering others.
However, witnesses representing retailers said the changes resulted in higher fees. Laura Karet, CEO of Giant Eagle Inc., a Pennsylvania-based supermarket chain, said the changes would cost the chain an additional $1.3 million a year.
Durbin said the fee is structured to avoid competitive pressures in a market already dominated by just two companies. Interchange fees are set by credit card companies, charged to merchants and paid to banks. Merchants are unable to negotiate with credit card companies on swipe fees, and banks have little need for it since they benefit from it, he said.
“When Visa and Mastercard increase interchange fees, banks want to issue more cards because they earn more with every swipe. And Visa and Mastercard benefit when there are more swipes because they take their own share, called network fees, from the merchant with every swipe,” Durbin said. “But merchants and their customers are taking it on the chin.”
Inflation has exacerbated the impact of fees on merchants and, by extension, consumers, Durbin said.