Visa Inc. and MasterCard Inc. face a renewed threat to one of the credit-card industry�s biggest revenue sources after Senator Patrick Leahy backed legislation to curb fees charged to merchants on each transaction.

Leahy, a Vermont Democrat and chairman of the Senate Judiciary Committee, will co-sponsor a measure by Senate majority whip Dick Durbin of Illinois, Durbin spokesman Max Gleischman said today. The so-called interchange or �swipe� fees average about 2 percent of each purchase.

The industry has escaped previous attempts to curtail swipe fees, which bring in more than $40 billion a year. Now the nation�s biggest card networks and lenders, including Bank of America Corp. and JPMorgan Chase & Co., find themselves pitted against two of the most powerful senators over the fees, which some lawmakers and retailers have said are excessive and hurt small businesses.

�The motivation behind this is really to put merchants in a position where they don�t pay their fair share,� MasterCard Chief Executive Officer Robert W. Selander said today after the Purchase, New York-based company said first-quarter net income climbed 24 percent to $455 million. �We think that Congress understands that you can�t give anybody a free lunch.�

Durbin�s measure, which is planned as an amendment to the financial industry overhaul bill, would let retailers offer discounts to customers for paying with cash or for using a particular brand of card or payment network, Gleischman said.

The other amendments from Durbin would restrict the amount payment networks may charge for debit-card transactions and mandate that the U.S. government receive the lowest interchange rates. Durbin, the chamber�s second-ranking Democrat, has said the U.S. is �a major user of credit cards.�

(Source: Bloomberg.com)