Credit and Debit Cards by Ruslan1319 is licensed under CC BY-SA 4.0
On September 7, 2022, RealClearMarkets published an op-ed by ATR Federal Affairs Manager Bryan Bashur. The op-ed discusses the negative impacts of the Credit Card Competition Act of 2022.
The piece begins by explaining that Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) have introduced this bill and wrongly claimed that it will increase competition. Instead of increasing competition:
The bill expands the regulatory authority of the Fed to intervene in the credit card market. The bill directs the Fed to require banks and credit unions to issue credit cards that utilize at least two unaffiliated payment networks. One stipulation is that the two network options may not both be Visa and Mastercard. This bill is clearly using the Fed to target two specific companies, while ignoring the collateral damage to consumers, banks, and credit unions.
The article goes on to explain that other requirements of the bill are not technologically feasible and are exorbitantly expensive. Bashur states that:
Payment networks will be required to disclose proprietary security information with competitors to fulfill the bill’s requirement that all networks must be accessible for every applicable credit card.
The op-ed next explains just how bad this new law would be for consumers:
The bill would limit card options for consumers. Under the new regulation, merchants would likely choose the network with the lowest fee, which in turn would reduce revenues going to banks and credit unions. Interchange fee revenue is used to fund rewards and cash back programs. A reduction in fee revenue will make it nearly impossible to keep offering rewards because the cost of providing the service will no longer be economical. As the International Center for Law & Economics points out, “Every rewards card, from airlines to entertainment, would likely disappear.”
The piece points to the result of similar legislation that targeted debit cards more than a decade ago:
Sen. Durbin’s eponymous “Durbin amendment” passed as a part of Dodd-Frank and imposed regulations on debit cards, which largely eliminated debit rewards. At the same time, about 22% of merchants raised prices on consumers after the enactment of the Durbin amendment.
The article then notes how lower-income Americans will be the most hurt by this new regulation and argues that in a time of inflation it is especially irresponsible to eliminate credit card rewards as options for people to save money on gas and grocery purchases.
In the end, the op-ed concludes that:
The onerous regulations imposed in the Credit Card Competition Act will do nothing to promote competition, but it will wipe out credit card rewards programs, stifle technological advancements in payment transaction technology, and make it more difficult for consumers to find savings during a time of inflation. The negative repercussions this bill will impose on consumers is a clear sign that lawmakers should oppose it outright.
Click here to read the full op-ed.