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Wall Street Stokes Culture War to Fight Swipe Fee Reform 

The credit card industry is attempting to whip up right-wing hysterics
to fight a bipartisan financial reform.

A bipartisan group of lawmakers is pushing for a piece of financial
reform that would unshackle small businesses and consumers alike from
the maw of Visa and Mastercard's credit card duopoly. Wall Street, in
response, is spending millions to thwart the bill's recent advances by
fueling a conservative culture war over gay pride demonstrations and
Chinese influence.

In coordination with big banks, Visa and Mastercard extract billions of
dollars
<[link removed]>
each year in "swipe fees" from retailers for the cost of accepting
payments from cardholders. Though the fees hit all retailers, and a
portion of them is passed on to consumers in the form of higher prices,
low-margin businesses like independent corner stores or gas stations
face a higher percentage of these costs relative to their revenue.

Since the start of the pandemic, the fees have increased by up to 40
percent
<[link removed]>,
rivaling rent as the second-highest overhead cost for independent
stores. Visa and Mastercard, which together control over 80 percent of
the credit card market, effectively get to set the rates for fees by
blocking competitive alternatives for the transaction routing at card
terminals.

A bipartisan coalition led by Sens. Dick Durbin (D-IL) and Roger
Marshall (R-KS) is aiming to alleviate the burden on small businesses
through the Credit Card Competition Act (CCCA). The legislation would
force card issuers that host these transactions (Visa and Mastercard) to
enable competitor networks to manage the processing and routing-the
service for which swipe fees are levied. By providing businesses with
competing options, they can choose the service with lower fees.

For Democrats and anti-monopoly advocates, it's another manifestation
of the Biden administration's crackdown on "junk fees" across sectors
of the U.S. economy. As swipe fees skyrocketed this past year, the
legislation has also drawn more Republican support than ever before.

In the legislative scrum over the annual defense authorization bill this
month, backers of the CCCA pushed for its inclusion, as they had the
previous year under the catchall national-security designation. During
negotiations, Sen. Marshall even threatened to hold up the defense bill
if the CCCA didn't at least receive a vote.

One major setback was that the bill's longest-running champion, Sen.
Durbin, was sidelined during the height of negotiations because he
caught COVID. However, both Marshall and Durbin announced that party
leadership guaranteed them a stand-alone vote on the bill this fall,
ending the defense bill fight. Neither senator could be reached for
comment on the bill's future.

"We see it as a small victory as the chorus of voices calling for reform
grows louder and Washington is hearing us," said Doug Kantor, the
general counsel for the National Association of Convenience Stores, a
member of the Merchants Payment Coalition. MPC led the charge to get
legislation passed in 2010 that allowed for similar competition in debit
card transactions, known as the Durbin Amendment. If leadership follows
through on its promise to bring the CCCA to a vote, the coalition is
confident they'll have enough support to apply the same standard to
credit cards.

The bill's recent advances are setting off alarm bells on Wall Street.
The bank and credit card lobby is marching in lockstep with conservative
dark-money groups to inflame culture-war issues on the right in the
hopes of splintering the cross-partisan coalition that's coalesced
around the bill.

In a recent ad campaign, shadowy right-wing groups have been issuing
mailers and other advertisements claiming the CCCA is a liberal handout
for "woke" big-box retailers like Target. One set of mailers was
bankrolled by the Conservative Accountability Foundation, a newly formed
organization based in Sen. Marshall's home state of Kansas but without
a listed address or phone number.

The mailers <[link removed]> draw
upon a recent controversy from earlier this summer. In celebration of
June's Pride Month, Target issued a line of LGBTQ merchandise, which
drew backlash from conservatives mostly online and then sparked a
boycott campaign. Target ended up caving to pressure, and removed its
pride merchandise from numerous stores and its website.

[link removed]

It's always been more convenient for the banks and credit card
companies to frame large retailers like Amazon, Target, and Walmart as
their main opponents in the swipe fee battle. These corporate stores do
form an uncommon alliance with small-business groups on swipe fees,
though the latter are the main ones driving the issue. What's new is
for the financial lobby to attack the large retailers on the basis of
participating in Pride Month.

Intended for a conservative audience, the attack ads are directed at
Sen. Marshall and other Republicans for their support of the bill, which
they call a "bailout" for Target. The text reads, "Target hates
conservatives but Sen. Marshall's bill gives them billions," with the
company's logo emblazoned with rainbow colors.

In a statement to Punchbowl News, which first reported
<[link removed]> the mailer, Sen.
Marshall's chief of staff Brent Robertson said: "When low-rent DC
grifters come out of the woodwork with a big bank funded (c)4 like this,
we know we're doing something right for the working family."

An ad campaign on Facebook this past month by Americans for Tax Reform
(ATR)-Grover Norquist's organization-pushes the same narrative,
with the slogan "Side with consumers, not woke retailers."

The mailer also taps into national-security fears about Chinese
influence inside the U.S. The Chinese national flag flies in the
background behind a cutout of Sen. Marshall next to a rainbow gay pride
flag. It then says, "your financial data could be processed by partners
of the Chinese Communist Party."

Financial interests have long used this talking point, that competition
in routing would make consumer financial data less secure. But they're
now attaching it to a broader hostility among conservatives toward
China. The CCCA includes provisions blocking foreign-owned companies,
and specifically China UnionPay, from participating in the transaction
routing networks.

"There's a certain desperation because it's hard to make a legit
conservative case against a bill that is designed to protect small
businesses from what is, in effect, a monopoly tax on their revenue,"
said Stacy Mitchell, the co-executive director of the Institute for
Local Self-Reliance.

Op-eds in local newspapers in red states are parroting the same line
about foreign threats to Americans' financial information. At the end
of June, one piece in The Florida Standard equated
<[link removed]>competition
in transaction routing to Chinese surveillance on social media platform
TikTok. The author, Samantha Beeler, is the president of the League of
Southeastern Credit Unions, which spent $20,000 on lobbying this past
quarter to oppose the CCCA, according to disclosure forms
<[link removed]>.
The credit card industry has relied on the nationwide network of credit
unions as surrogates for years to do its bidding.

The League of Southeastern Credit Unions and the ATR did not respond to
a request for comment to clarify their opposition to the legislation.

Talking points about woke retailers and China have made their way into
lobbying on the Hill, according to numerous groups involved in the
legislative fight. In addition to ad campaigns, banks and credit cards
are funneling millions to lobbying campaigns to beat back the push for
swipe fee reform. The American Bankers Association spent close to $5
million this year on issues including the CCCA, while the Credit Union
National Association laid out over $2 million in the past two quarters
to lobby on swipe fees, according
<[link removed]>
to lobbying disclosures
<[link removed]>.
Mastercard supplemented these conjoined efforts with almost $200,000 of
its own firepower last quarter to four different lobbying shops.

Wall Street's efforts to stir up a culture-war battle over financial
regulation clash with its recent posturing over the past several years,
as the face of corporate initiatives to promote diversity, equity, and
inclusion (DEI). The top banks and credit card companies routinely
pledge support for LGBTQ inclusivity and diversity in hiring. Some firms
held
<[link removed]>
their own Pride Month celebrations this summer.

Both Wall Street and corporate America have in recent years used liberal
social causes to stymie legislative reforms that threaten their
interests. Most recently, Big Tech killed an antitrust bill last year in
part by arguing that the bill would harm
<[link removed]>
minority small businesses and by painting
<[link removed]>
anti-monopoly groups as anti-trans.

"It's increasingly becoming a Republican talking point to go after
companies for supporting social inclusion ... That should raise
questions for Democrats about what is motivating these bills," said Adam
Kovacevich, CEO of Chamber of Progress, a tech trade group representing
Amazon, Google, and Facebook, to Politico
<[link removed]>
at the time.

The credit card lobby and their front groups are flipping the script by
using conservative boycott campaigns to their advantage.

~ LUKE GOLDSTEIN, WRITING FELLOW

Follow Luke Goldstein on Twitter <[link removed]>

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