Credit card access is essential to modern life, and lawmakers should be working on policies to expand access and level the playing field. Georgia’s Congressional delegation needs to fight against policies that could jeopardize consumer safety and take money from vulnerable people.
Last year, Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced the Credit Card Competition Act (CCCA), putting more power into the hands of the government by placing a federal mandate on credit card routing. While supporters of this legislation claim it would bring down prices for consumers by limiting the small fees that merchants pay when they accept credit card transactions, data proves this is not the case.
Even though CCCA did not get far last session, Senators Durbin and Marshall have introduced “The Credit Card Competition Act of 2023” with co-sponsors Senator Vance (R-OH) and Peter Welch (D-VT). The House companion bill is sponsored by Representatives Zoe Lofgren (D-CA), Lance Gooden (R-TX), Tom Tiffany (R-WI), Jeff Van Drew (R-NJ).
CCCA seeks to add routing mandates to credit, which will force financial institutions to add an additional “unaffiliated” payment network to their credit cards, instead of just the ones they know and trust. In response, payment networks will lower interchange rates for merchants so they can compete with the influx of new, cheap networks.
Credit interchange helps to offset the cost of cardholders’ much-loved rewards, as well as provide less liability to the cardholder by covering the risk of fraud. Credit unions and banks rely on retailers to pay a very small fee (typically 2% of a transaction) to assist with fraud protection. Reduced interchange income will result in less time and fewer resources allocated to protecting members from fraud, issuing replacement cards, and investing in the latest security.
We can predict this because we have already seen this policy in action. Years ago, Senator Durbin pushed through an amendment to impose routing mandates on our debit market and cap debit card interchange fees, saving retailers billions. In the years since, nearly $100 billion has been funneled out of our electronic payment system. As a result, banks have tried to recoup their losses by raising the minimum balance for accounts, reducing the availability of free checking, and adding new account fees.
The interchange network system is designed to protect consumers and businesses from debit and credit card fraud schemes, so they are not held liable for fraudulent transactions. It has been a tremendous success. Last year alone, the interchange system stopped more than $80 billion in fraud attempts. Routing mandates mean that fraud and liability protections will be severely reduced or eliminated. If transactions are routed over an alternative network that does not have the same level of security, it could put consumers, merchants, and financial institutions at risk.
The Credit Card Competition Act is an expansion of bad financial policy and must be stopped. To protect the financial safety and prosperity of their constituents, please encourage your state legislators to vote against SB 1838 and HB 3881.
Merry Pateuk serves as senior vice president, Industry Engagement at PSCU, the nation’s premier credit union service organization and an integrated fintech solution provider.
