WASHINGTON–The Credit Card Competition Act, which credit unions strongly oppose, has been reintroduced in Congress. The legislation has strong support from the country's retailers and merchants.
The legislation is similar that which failed to pass the prior Congress and would require that cards from financial institutions with $100 billion or more in assets be enabled to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam, or even American Express or Discover.
The financial institution would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning networks would have to compete over fees, security and service, according to proponents of the bill. Supporters of the Credit Card Competition Act have said it would save merchants and their customers an estimated $11 billion a year.
There are two differences from the bill in the prior Congress, according to CUNA:
The language:
* States that routing cannot be limited to two networks if any of the networks are included on the list of “designated national security risks” under subparagraph D.
* Requires the list of “designated national security risks” to be updated every two years.
Supporters have also stressed that card rewards programs would not be affected and that community banks and small credit unions would be exempt. Only Navy FCU falls above the $100 billion in assets threshold.
In the Senate the measure is being sponsored by Sens. Richard Durbin (D-IL), Roger Marshall (R-KS), Peter Welch (D-VT) and J.D. Vance (R-OH). In the House it is being sponsored by Reps. Lance Gooden (R-TX), Zoe Lofgren (D-CA), Thomas Tiffany (R-WI) and Jefferson Van Drew (R-NJ)
‘Harmful & Misleading’
“We are disappointed that Senators Durbin, Marshall, Welch and Vance have again introduced the harmful and misleading Credit Card Competition Act,” said NAFCU President and CEO Dan Berger. “Expanding interchange price controls and routing mandates to credit cards is bad policy, pushed by big box retailers who are looking to pad their bottom line. Contrary to merchants’ deceptive claims, data shows consumers end up paying more across the board – from higher prices of goods, to more expensive card products at their financial institutions, and fewer rewards and benefits on their card purchases.
“The legislation doesn’t promote competition,” Berger continued. “It opens the payments system up to risk from untested networks that cut corners at the expense of consumers, small businesses, and the credit unions that serve them. This bill failed to advance during the last Congress for a reason, and NAFCU will work tirelessly to remind lawmakers of the consequences it will have and ensure it does not pass.”
Nussle: 'Squeezing the Consumer'
Similarly, CUNA President/CEO Jim Nussle outlined similar concerns.
“This ‘big box bill’ is just another way for large merchants to squeeze more out of the American consumers’ pockets by disrupting payment systems that consumers want in place, leaving them vulnerable,” said Nussle, poionting to survey data shows that consumers overwhelmingly value security and credit card availability.
“It is reprehensible that at a time when hard-working Americans are already feeling the financial pinch from inflation, big box bullies are pushing for financial breaks that would risk both the data security and access to credit for consumers and small business owners," Nussle continued. "This bill would allow these large merchants to use the cheapest credit card processing option, with no requirement to keep consumers’ data safe or return savings back to them.
“Interchange is the cost of doing business,” Tussle added. “Merchants like Target and Walmart reap the benefits of credit card usage with immediate payments, protection from fraud, and typically larger purchases by consumers – but don’t want to pay the cost of accepting credit cards.”
“The debit card interchange limitations that Senator Durbin slipped into the Dodd-Frank Act in 2010 did not result in any consumer cost savings. Since that time, credit card fraud rates have doubled. Why would we expect a different result from this legislation? We are going to see retailers lining their pockets with money without reducing prices, leaving consumers and small business owners in the lurch. We pushed back to stop this legislation last session, and we will do it again. CUNA, state credit union Leagues, and credit unions oppose these changes to the current interchange system, and vow to protect the more than 135 million credit union members across the country who don’t deserve to suffer from a government mandate that will shift costs and risks to them.”
As CUToday.info reported earlier, the legislation was expected to be introduced this week, and CUNA, NAFCU and the Defense Credit Union Council all issued statements and sent letters opposing the bill.
‘Falsely Named Proposal’
In a letter to the Hill earlier this week, CUNA Deputy Chief Advocacy Officer Jason Stverak wrote, “While retailers like the benefits of credit cards – immediate payment, protection from fraud, and often larger purchases by consumers – they don’t like paying the cost of accepting credit cards. Interchange fees help defray (but do not cover) the cost of fraud detection, credit monitoring, and fraudulent purchase protection that makes consumers and merchants whole when bad actors attack.”
“This falsely-named proposal promises more ‘competition” – but would instead benefit big retailers while hurting consumers,” the letter continues. “It would allow retailers to use the cheapest processing option, with no requirement to keep consumers’ data safe or return savings back to them.”
Stverak pointed to CUNA research showing 95% of consumers says interchange works well and more than half say it is “excellent.”
Defense CUs Express Opposition
Similarly, in its letter to the Hill, the Defense Credit Union Council has also registered its opposition to the legislation.
“Opposing this legislation on behalf of consumers is very important for DCUC and its member credit unions. We’ve seen retailers misdirect Congress before with the 2010 Durbin Amendment on Debit Interchange which never passed any savings onto the consumer,” said Anthony Hernandez, DCUC president/CEO. “This fact needs to be amplified along with other long-term negative consequences as Senators and Representatives consider whether supporting this legislation is worth the damage and lack of cyber security caused by routing credit card transactions to the cheapest network. I am very happy to work with CUNA and NAFCU on presenting a united front on behalf of the entire industry which is composed of 135 million members.”
Retailers Hail Bill
On the opposite of the issue are various retailers and merchants’ groups, which are praising the reintroduction of the legislation.
“Lawmakers laid the groundwork last year and we look forward to them passing this bipartisan, pro-Main Street legislation this year,” Merchants Payments Coalition Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “Swipe fees that drive up costs for small merchants and prices for American families are already the highest in the industrialized world and are going nowhere but up. Lack of competition is the problem, and the sooner the card industry can be made to compete the better. As policymakers work to reduce inflation, this carefully crafted bill will lead to lower fees and better security while helping merchants hold down prices.”
The merchants group said the legislation would address “swipe” fees that have doubled over the past decade, “soaring by $22 billion in 2022 alone to a record $160.7 billion, and are most merchants’ highest operating cost after labor, driving up consumer prices by an estimated $1,024 a year for the average family.”