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Floor Speech

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Mr. DURBIN. Mr. President, yesterday the Federal Reserve raised interest rates by half a percentage point, the biggest rate hike in 22 years. The effort is underway to stop inflation. For millions of American families who are struggling to pay their bills and afford the basics, this can't come fast enough. The U.S. economy has added nearly 1.7 million jobs this year. Consumer spending is strong, but higher costs for groceries, gas, housing, and more are straining family budgets and making people very anxious about their future.

In announcing the interest rate hike yesterday, Federal Reserve Chairman Jerome Powell said the following: The biggest drivers of inflation today are higher prices caused by Russia's war on Ukraine and rising COVID cases in China, which can further disrupt supply chains. In other words, the Federal Reserve Chairman said two of the biggest drivers of inflation are really global; they are complicated; and they aren't going to be solved by America alone.

Fortunately, there are some simple solutions we can take to help families save money. Let me tell you about three of them. The first is to cut gas prices. I can't think of a single cost of living that is more visible. Every street corner in America has a sign declaring what the cost of a gallon of gasoline is, and people compare these in their mind even as they drive down the road. Some people make a hobby of it. Anyone who has filled up a gas tank in the last few months has felt the sticker shock of Mr. Putin's war on Ukraine.

President Biden has already made two changes that will reduce gas prices. A little over a month ago, he announced the United States will release 1 million barrels of oil a day from its Strategic Petroleum Reserve--in other words, to increase the supply in an effort to bring down the price--1 million gallons a day for 6 months, while oil companies ramp up domestic production to make up the shortage caused by Mr. Putin's war.

President Biden also has issued an emergency fuel waiver allowing E15 gas--that is gas with a higher blend of ethanol--to be sold across America this summer. Normally E15 isn't sold in the summer, but the White House estimates that by allowing gas stations to sell it, it will save Americans 10 cents a gallon.

Of course, if we are really serious about cutting gas prices and reducing the power of tyrants like Putin whose nations happen to sit on big oil reserves, we can do that by investing more in electric cars and clean energy sources that don't break the bank or bake the planet.

Here is another solution that can save millions of families hundreds of dollars every single month. Let's agree to cap the monthly cost of insulin for diabetes at $35. In 1923, almost 100 years ago, researchers in Canada were awarded the Nobel Prize for the discovery of insulin to manage diabetes. They sold the patent--listen carefully--for this drug discovery for $1. They wanted to make sure that no one would ever profit from this lifesaving drug.

Fast forward 100 years. Something has gone terribly wrong. The same vial of Humalog insulin that Eli Lilly sells for $40 in Canada, it charges $350 for in the United States--40 in Canada, 350 here. The maker of Lantus insulin has raised their price more than 26 times since the year 2000: from $35 to more than $300 today--26 price hikes in 22 years.

The cost of insulin can range from a couple hundred dollars a month to more than $1,000 a month. That is the price this year. Who knows how much it will be next year. Who bears the burden of these costs? Patients and families. There are 37 million Americans who have diabetes. The number goes up every year.

Senator Warnock of Georgia has introduced a critical bill, the Affordable Insulin Now Act, to cap the monthly cost of insulin at $35 a month. I am a cosponsor. Many Senators are. Senator Collins and Senator Shaheen are spearheading a similar bipartisan effort to support it.

I urge more of our Republican colleagues to listen to the people they represent. There are lots of people struggling to afford insulin in their States as well as the blue States. Let's do this together. Can't we agree on one thing in the U.S. Senate that we are going to do to help America this year? I think this is a good project and a good goal.

The third way we can reduce inflation is a little more complicated, but it is worth talking about. We need to rein in the excessive fees charged by Visa and Mastercard for their products.

We had a hearing yesterday. It was in the Senate Judiciary Committee. It was on something called a swipe fee. Of course, the swipe fee is the amount of money that has to be paid in order to move that piece of plastic through the machine. Most consumers don't even know it exists. Every retailer knows it exists.

It was the first hearing our committee has held on this topic in 16 years--16 years. And I was there 16 years ago. I walked into the Senate Judiciary Committee, chaired by the Senator from Pennsylvania, Arlen Specter, and the hearing was on swipe fees and interchange fees. I had never heard of the term before, and I sat down and I learned.

What happened in that meeting was an exposition of the current situation for every restaurant that you go to buy a meal in, every store that you shop in, all the grocery stores. Any store that takes plastic knows what a swipe fee or an interchange fee is.

Here is how it works. Visa and Mastercard control over 80 percent of the credit and debit card markets in the United States--starting point. It isn't as if you can walk away from these two companies and be a retailer in America. If you are going to take plastic, you are going to take these cards.

And every time a card with a Visa or Mastercard logo is swiped at the retailer, Visa and Mastercard charge a fee that takes a cut out of whatever the transaction amount turns out to be. Now, some of that cut Visa and Mastercard keep for themselves. Most of it is given to the bank that issues the card.

The fee that Mastercard and Visa require the card-accepting merchant to pay to the card-issuing bank is the interchange fee. It is usually charged as a percentage of the transaction plus a flat fee, for example, 2 percent of whatever the transaction cost is plus 10 cents.

How does that work out in practice? Just an example: Say you buy $100 worth of groceries or kids' clothes on your credit card. After the fees are deducted, the merchant gets $98, maybe a little less. For merchants operating on tight profit margins--and that is most of them--these fees can add up to a big problem.

Laura Karet was one of our witnesses yesterday. She is an amazing woman. What a resume. She is the CEO of a supermarket chain known as Giant Eagle. It is a regional, American-owned chain of grocery stores based in Pittsburgh, PA. At our hearing yesterday, she explained that her industry--groceries--typically operates on a 1-percent profit margin--1 percent. So the 2-percent swipe fee wipes out their entire profit.

What do they do? Well, there is only one obvious answer: They raise the prices to cover the high swipe fees required by Visa and Mastercard, and customers end up holding the bag.

Remember, we started this conversation about inflation. Make no mistake, what I have just described to you is inflationary.

Swipe fees aren't just annoying to the retailers; they are anti- competitive. Ms. Karet told us the story that on April 22, she received the latest modification of the swipe fees being charged to her businesses by Visa and Mastercard. She said the modification was 300 pages long, almost unintelligible. She handed it over to her accountants and to her lawyers and said: Make some sense out of it. What are they doing to me?

The banks get the swipe fees, but the banks do not set the fees. Banks let Visa and Mastercard do the behind-the-scenes work and fix the fees. That means that all the thousands of card-issuing banks in the Visa and Mastercard network receive the same exact schedule of swipe fees from merchants regardless of whether they are efficient or inefficient, regardless of whether or not they are preventing fraud. It is a free lunch for the banks.

When the fee rates go up, as they did just a few weeks ago, banks make more money every time people use plastic--debit or credit cards-- and they issue more cards. That benefits Visa and Mastercard, which take their cut, called a network fee, out of each swipe. So Visa and Mastercard have an incentive to keep raising fees.

What can merchants do? Well, you might think they would sit down at the table and say: We are going to bargain about this fee, Visa and Mastercard. We object to it being raised, and we want to let you know that if you want to do business with our business, that is the way it will be.

That doesn't happen at all. This is noncompetitive. Visa and Mastercard control 80 percent of the plastic market in America. They say to the grocery store, to the restaurant, to the shop: Take it or leave it. Play by our rules or you won't play at all. We just won't even let people present their cards at your business.

Visa and Mastercard tell merchants, if they want to be able to accept payment from thousands of banks in their networks, the merchants must agree to Visa and Mastercard's fees and terms. Take it or leave it. Only merchants can't leave it. Visa and Mastercard, as I have said repeatedly, control 80 percent of the credit and debit card market.

Incidentally, the figures from 2020 show--I am going to roughly approximate these, and I will clear them up in the Record--86 billion transactions using debit cards, 41 billion transactions using credit cards in the year 2020. How does that compare with cash and check? Cash, if I remember right, was 32 billion compared to 120 billion for plastic. And what about checks? How many people are writing checks? It was 5 billion transactions compared to plastic, which was over 120 billion.

The reality is, when swipe fees go up--and they do regularly--that cost gets built into the price consumers pay at the checkout counter and at the gas pump.

Remember those gas prices? You wonder why they are hitting $4 a gallon, $5 a gallon? They include the swipe fees, the credit card fees, the debit card fees that are being added on to the cost of gasoline.

Take a look at this chart. In the 16 years between the first hearing in the Senate Judiciary Committee--one that I attended on swipe fees-- and now, Visa and Mastercard have imposed $794 billion in swipe fees-- fees passed on directly to American families and consumers. That is a staggering amount--$794 billion, for the hidden fee you never see.

Visa and Mastercard just raised these fees again 2 weeks ago. Senator Marshall, my Republican colleague from Kansas, and I sent them a letter saying this is exactly the wrong time to be raising your fees. It is tough enough for these businesses trying to hire people and get back into business after COVID-19, tough enough for families who are fighting inflation. Why do you have to raise them now? You are very profitable companies. The banks are doing quite well, too, I might add. They did it anyway.

These fee increases are adding to inflation. The market can't fix the problem because the credit and debit card market isn't competitive. The retailers have no voice in what this fee is going to be. It is ``take it or leave it.'' Visa and Mastercard have what they call a duopoly-- not a monopoly, one company controlling everything--but these two companies, Visa and Mastercard, control over 80 percent of the plastic market.

What can we do about it? Well, in our hearing, we talked about several responses. First, let's bring transparency to the market. The last thing that either Visa or Mastercard want to see is sunlight-- people understanding what they are charging, why they are charging, the impact it has on prices, the impact on inflation. They want this to continue to be a deep dark secret buried in 300 pages of legal gobbledygook that they sent to the retailers.

If consumers knew how much their Visa and Mastercard purchase cost at the local restaurants or businesses, they might try using a less costly card and there are some out there. It would be like giving the business a tip, and it would help bring down prices.

So why not require banks to show on their monthly statement that they send to us with their credit-debit card transactions how much of that was swipe fees? They could do it in a second. They wouldn't dare. They can't ever embrace transparency. That is just about part of this process. It is all in secret, in code, and legal gobbledygook. I will bet that would open a lot of eyes if you saw each month how much we are paying in swipe fees.

Incidentally, Ms. Karet talked about her supermarket chain. She said: The three main expenses we have for my supermarket chain in Pennsylvania, Indiana, and Ohio are No. 1, labor costs--understandable; No. 2, rent--that is understandable as well; No. 3, credit-debit card swipe fees. She estimated that it is going to cost her $1 million or more in her businesses based on what Visa and Mastercard just did two weeks ago to raise the fees.

Here is another way we can reduce inflation. Let's prevent Visa and Mastercard from hiking swipe fees up to unreasonable levels.

Yesterday, I pointed out that in Canada, the most commonly used debit card system, called Interac, operates with interchange fees of zero. There is no interchange fee. All the arguments that the banks and credit cards make in this country about why they have to charge these retailers these hidden fees disappear in Canada because why? The government stepped in. They said: We are going to regulate this. We are not going to let the banks and credit card-debit card companies dictate the policies in our country.

They are not alone. The European Union did the same thing. There is a long list of other countries that are moving in that same direction. It operates quite well in these countries with low fraud and high consumer satisfaction.

We don't have to eliminate interchange fees all together, but for goodness sake, we ought to make sure they are not excessive and not adding to inflation.

There are two ways we can do it: Promote something called competition. Are you a dyed-in-the-wool capitalist; do you believe in a free market? I bet you believe in competition, don't you? There is no competition in these fees. It is ``take it or leave it.'' These plastic companies dictate these terms to the retailers that honor their cards. We can promote competition by giving merchants more options on each of the swipes or place reasonable limits on their fees. Other countries, as I said, figured it out. Many countries around the world say that swipe fees are a fraction of the cost of what they are here because those nations limit Visa and Mastercard.

We are afraid to tackle the giants. Our government and the people that work in this Chamber--many of them are frightened by the size of Visa and Mastercard. I didn't get that message. We can do better here. If we do, consumers and competition will benefit.

The bottom line is this: If you are serious about reducing costs for American families, get serious about reining in swipe fees. Visa and Mastercard swipe fees are adding to the fires of inflation every single day and they are doing it in secret. Is that what we want in our economy? Is that what American families need at this moment in history? I think not.

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