WASHINGTON—The lines are being drawn anew in Washington for the second go-round on the Credit Card Competition Act, with strong positions being taken on both sides of the legislation and supporters of the legislation saying they have twice as many supporters—including bill co-sponsors--in 2023 than they had in 2022.
As CUToday.info has reported, credit unions and financial institutions are staunchly opposed to the bill, calling it “harmful” and “falsely named,” while the nation’s retailers and merchants are just as firmly behind the bill.
The Merchants Payments Coalition reported that close to 2,000 companies and a total of 270 trade associations from across the country have signed letters calling on Congress to pass the bill.
“This legislation has twice as many sponsors as last year and the number of small businesses and trade associations voicing their support is increasing every day,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Momentum is building rapidly and it’s clear that swipe fee reform is a bipartisan issue that’s about Main Street versus Wall Street, not one party versus the other. These fees impact small businesses and consumers in every state and congressional district in the nation and these letters are proof that Main Street is calling for relief.”
Nearly 2,000 Companies
According to the MPC, a letter sent to Congress today by 1,980 individual merchant companies said Visa and Mastercard’s control of more than 80% of the U.S. credit card market means “they do not have to compete with any other service provider for merchant business” and that they “bar their competitors from even having a shot at business with banks that issue their cards.”
As CUToday.info has reported, the Credit Card Competition Act of 2023 is being sponsored in the Senate by Sen. Roger Marshall (R-KS), Dick Durbin (D-IL), Sen. J.D. Vance (R-OH), and Sen. Peter Welch (D-VT), and in the House by Rep. Lance Gooden (R-TX) and Rep. Zoe Lofgren (D-CA).
A Cornerstone of a Response
The Cornerstone Credit Union League, meanwhile, said it will be dialing up its advocacy efforts as two Cornerstone-region lawmakers are named among the original sponsors of the bill, Sen. Roger Marshall (R-Kan.) and Rep. Lance Gooden (R-TX) introducing the House version.
“Cornerstone League and Arkansas, Kansas, Missouri, Oklahoma, and Texas credit unions are committed to offering the most secure, reliable credit card payment environment for consumers,” said Cornerstone League President and CEO Caroline Willard. “We support an environment that facilitates quick and secure transactions and ensures fraud protections and other benefits, such as affordable access to credit.”
Added Cornerstone League EVP and Chief Advocacy Officer Jim Phelps, “We believe the Credit Card Competition Act of 2023 will disrupt this environment for credit union members. The current system is trusted by financial institutions and offers real, built-in benefits to consumers.”
The league stated fees help pay for the cost of fraud prevention, including the cost of issuing new cards, and make consumers whole when there is a breach.
“Interchange fees support affordable access to credit and the many protections that are currently in place. The current interchange system works,” said Willard. “We at Cornerstone will now turn up the volume with Sen. Marshall and Rep. Gooden to educate them on the detriment of this legislation, as well as activate our nearly 700 credit union members to make their voices heard on this issue,” said Willard.
Similar Language
With a few exceptions, the legislation is similar to 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.
Two Differences
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.
With the bill now introduced, the National Federation of Independent Business (NFIB) sent letters of support to the House and Senate. NFIB President Brad Close also participated in a press conference hosted by Sen. Marshall at the U.S. Capitol following the introduction of the legislation.
‘Much-Needed Competition’
“This legislation will help inject much-needed competition into credit card processing,” said Close. “Currently, small business owners do not have the market power to negotiate with large credit card companies on swipe fees, which have more than doubled since 2012. By allowing owners to choose between multiple credit card network options, it would allow them to choose the option that is best for their business. We applaud the re-introduction of this legislation and urge Congress to pass it quickly.”
According to the NFIB, businesses would benefit from the Credit Card Competition Act of 2023 as it would create competition in the credit card processing market, giving owners choices to help them with “rapidly rising swipe fees” charged to small businesses that accept credit cards.
Bankers Express Opposition
Meanwhile, the nation’s bank trade associations are lining up with credit unions again in opposing the legislation.
“ICBA and the nation’s community banks strongly oppose the introduction of controversial legislation…to create new credit card routing mandates, which would eliminate funding for popular credit cards rewards programs, reduce access to credit, and weaken cybersecurity protections,” said Independent Community Bankers of America (ICBA President Rebecca Romero Rainey. “Applying routing restrictions to credit card transactions would expand the Durbin Amendment’s government-orchestrated transfer of income from consumers to the nation’s largest retailers, such as Amazon and Walmart. According to Federal Reserve Bank of Richmond data, large retail merchants have pocketed $106 billion in interchange fees funneled to them by the Durbin Amendment—violating their pledge to pass the windfall to consumers.
‘Anti-Consumer Intervention’
“This anti-consumer government intervention would also end popular credit card rewards programs by preventing card companies from funding them, as the Durbin Amendment did to debit card rewards programs,” Romero Rainey continued. “ICBA polling conducted by Morning Consult last year indicates consumers oppose the policy change, with 61% of Americans saying consumers would not benefit from overhauling the card networks, including a bipartisan majority of Democrats (52%), independents (67%), and Republicans (65%).
“And while the bill’s expanded mandates are designed to apply to banks with over $100 billion in assets, the measure would require all banks—including Main Street community banks—to subsidize the costly and burdensome changes it would impose on the payments system. This refutes the sponsors’ claims that their plan would help community banks and risks driving small issuers to exit the credit card business altogether — limiting access in local communities.”
No Security Standards
Finally, Romero Rainey added, “Further, expanding the Durbin Amendment would hand over the security of the nation’s credit card system to merchants — which are not required to meet the same rigorous data security standards, fair lending, and privacy laws that apply to highly regulated community banks.”
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