Congress' War on Interchange Fees Is Bad for Taxpayers and Consumers

For more than fifteen years,  the credit card payments industry has been under siege,  whereby a number of elected officials have been seeking price controls on interchange fees – sometimes derisively called swipe fees – as well as network routing mandates. But this war escalated to a new front, when Senators Durbin (D-IL) and Marshall (R-KS) recently sent a note to Transportation Secretary Pete Buttigieg and CFPB Chair Rohit Chopra calling on them to investigate airlines’ changes to their frequent flier programs – effectively accusing air carriers of baiting and switching consumers. If anything, the deceptive tactics belong to politicians, who seem to take umbrage over airlines speaking out against legislative efforts to cap credit card fees. Even for Washington, the Senators’ attempt to bring the executive branch down on their opponents is alarming. 

All sorts of claims have been made - that lower interchange fees will lead to lower prices in stores and that credit card network providers earn too high a profit. However, the fallout from interchange fee caps in Europe, Australia and the United States are apparent. After the Durbin amendment, debit cards in the United States earn virtually no rewards.

It should also be noted that airlines borrowed against their frequent flier programs during the pandemic to help stay afloat. Without that line of credit, it seems likely that they would have been forced to ask the federal government for additional COVID assistance.  To be sure, airlines have made changes to their programs that are sometimes unpopular with consumers. Delta’s recent changes were met with outrage by their customers which forced the airline to scale back its plans. But this only demonstrates that the competitive discipline imposed by market forces still does work to make airlines accountable to travelers, without additional heavy-handed regulation from government agencies. 

Attempting to enlist executive branch agencies in the silencing a voice in a legislative battle is unacceptable to taxpayers, who have a major interest in avoiding price controls on transaction fees . This is a particularly questionable move as the Biden Administration is consistently testing the limits of precedent and executive branch powers. From the FTC to the IRS, from the EPA to CFPB, taxpayers have watched with growing concern as federal agencies flex their muscles and their budgets. Members of Congress should be concerned as well, assuming they value the constitutional separation of powers that invest lawmaking authority in their branch of government. 

Fortunately, Senators Durbin and Marshall can solve this problem in one of two ways: withdraw their call for a DOT and CFPB investigation, or withdraw their legislation from consideration until the executive branch concludes that investigation.

Taxpayers deserve thoughtful consideration of the drawbacks of interchange price controls and routing mandates, without the appearance of intimidation.