As the Representative from the 128th State House District of the Georgia General Assembly, I have a commitment to represent the best interests for my constituents and all Georgians. I have a duty to ensure that policy that comes out of our State House or Capitol Hill promotes the upward mobility of historically marginalized communities.
State Rep. Mack Jackson
Over this past year, I’ve watched as inflation levels have steadily increased to record highs. This has made it ever more difficult for everyday goods to remain economically accessible for American consumers, especially for those within the African American community.
Now, Congress is looking to further stress consumers’ wallets by returning to a failed economic playbook. Just over 10 years ago, Senator Dick Durbin of Illinois implemented a rule that restricted interchange fees (the fees merchants pay to use electronic payment networks) on debit card transactions and imposed a routing mandate on debit cards. This created a race to the bottom on interchange fee rates because it made banks add an extra unaffiliated payment network to their debit cards, so payment networks responded by lowering their rates to stay competitive, and both big and small banks lost billions in interchange fee revenue.
Banks lost money and passed those losses onto us by reducing the number of free checking accounts, adding new fees, and raising the minimum balance for bank accounts, ultimately making banking less accessible. When looking at the impact of the Durbin Amendment, George Mason University found that the law increased the unbanked population by nearly 1 million Americans, including a disproportionate number from minority and low-income communities. The National Black Chamber of Commerce even spoke out against the amendment after its passage, with their co-founder and president stating that the amendment “threatens the financial future of millions of up-and-coming consumers”.
Just like the debit regulations 12 years ago, the Credit Card Competition Act (CCCA) will directly hurt the African American community by making financial services more expensive and less accessible. Recent studies conducted by the Federal Reserve Board of Governors found that nearly one-third of African American consumers are underbanked. Economists in 2021 estimated that putting these types of regulations on credit cards could take away credit access from up to eight million African American consumers, making the situation even worse.
Adding insult to injury, the legislation did not even give consumers the minor benefits it promised. As noted by the Congressional Black Caucus Institute, retailers did not pass any of their new savings on to consumers. Instead, research conducted by the Federal Reserve Bank of Richmond determined that 98.8 percent of retailers chose to raise prices or keep them the same following the implementation of the law.
Congress is now considering regulating credit cards in the same way through the CCCA. This bill will hurt consumers across the board but will have particularly harmful impacts on the African American community.
We have already seen the significant harm that this law has had on our debit market, so you can only imagine the damage this law would do to our credit market. Banks would lose billions of dollars every year, leading them to reduce rewards and jack up fees, just like they did in Australia when their Federal Reserve Bank implemented similar policies. Banks would also have to reduce their own liability by raising credit standards, making credit far less accessible to struggling borrowers. Moreover, by enacting the Credit Card Competition Act, consumers would essentially be gifting big box stores up to $50 billion annually.
We need to stand against the Credit Card Competition Act of 2022 to safeguard African American communities from further economic harm.
Rev. Mack Jackson is a Georgia State Representative for the 128th District, representing counties in central Georgia
