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)