Credit Card Competition Act Would Stop Visa and Mastercard From Handing Keys to China

In an op-ed last month, League of Southeastern Credit Unions President Samantha Beeler said the United States should ban credit card payment networks that work with the Chinese government. In that case, she should support the Credit Card Competition Act rather than making false claims about what it does.

Beeler wrote that the legislation would allow foreign-controlled networks including China UnionPay to process Americans’ transactions. That’s simply not true. In fact, today there is a dangerous loophole in the law that allows any financial institution to have UnionPay handle their credit card transactions. The Credit Card Competition Act would specifically close this loophole and bar China UnionPay as well as any other payment network owned or sponsored by a foreign nation from processing U.S. credit cards.

Beeler says it’s important to “account for American financial services companies that have partnered with UnionPay.” In that case, she should be concerned with the dangerous game Visa and Mastercard have played by giving this puppet of the Chinese communist government a role in setting security standards for credit cards Americans use every day. Because of them, China UnionPay already has significant reach into our nation’s payments system. Over the past decade, they first gave China UnionPay a seat on the governing board of EMVco, which controls the microchips embedded in current credit and debit “chip” cards. They then added China UnionPay to the even more powerful Payment Card Security Standards Council.

In addition, nothing in current U.S. law keeps banks from making China UnionPay a network on their cards. That would be the final step in giving China direct access to how much Americans spend and where they spend it. This bill bans that.

These escalating efforts by Visa and Mastercard to give China a say in how payment security works for Americans are one of the key reasons conservative Republicans in Congress including Senators Roger Marshall of Kansas and J.D. Vance of Ohio plus Representatives Lance Gooden of Texas, Tom Tiffany of Wisconsin and Jeff Van Drew of New Jersey have introduced this legislation.

And protecting American families against China is not all the bill does. It was drafted in response to “swipe” fees ranging from 2-4 percent of the transaction that Visa, Mastercard charge merchants to process payments. Credit and debit card swipe fees have more than doubled in the past decade, soaring $22 billion last year to a record $160.7 billion. They have become most merchants’ highest operating cost after labor and drive up prices by over $1,000 a year for the average family.

Lack of competition is the problem. Visa and Mastercard centrally price fix swipe fees charged by banks that issue credit cards under their brands, and also limit processing to their own networks. This bill would require that cards from the largest banks be able to be processed over at least one other network, creating competition over fees, security and service that would save merchants – and consumers – over $15 billion a year.

China UnionPay would be barred from being the second network. Instead, one of several well-established, high-security networks like NYCE, Star or Shazam that have handled billions in debit card and ATM transactions for decades would be enabled. According to the Federal Reserve, these networks have one-fifth the fraud of Visa and Mastercard’s networks.

It's curious that the head of a credit union association is writing about this legislation at all. The bill applies only to institutions with at least $100 billion in assets, so community banks and all but one credit union in the entire nation are exempt.

Another false claim is that credit card rewards would disappear. In fact, rewards would not be affected because they are set by the banks that issue cards, not the networks that process transactions. And the savings under the bill is a fraction of total swipe fee revenues, leaving plenty to fund rewards. Americans would still get their rewards, and merchants would use the savings to hold down prices during these days of still-high inflation.

Close to 2,000 businesses and 270 merchant associations have signed letters to Congress supporting the bill, most of them small businesses. Small merchants need relief the most because they pay the highest swipe fee rates, have the least ability to navigate complex contracts and are powerless to negotiate.

Beeler is right that “some of America’s largest corporations have sided against our nation’s core interests.” But it’s Visa, Mastercard and megabanks like JPMorgan Chase who meet that description by making billions on the backs of small Florida businesses and families while handing over the keys to our credit cards to China. It’s time for Senators Marco Rubio and Rick Scott to join in the fight to stop them.