“As trade associations representing virtually all banks of all sizes in the Nation, we write to express our strong opposition to any introduction of the so-called ‘Credit Card Competition Act’ or other legislation that would impose network routing requirements on credit cards.”

Why this is important: A number of trade associations representing virtually all banks of all sizes recently wrote to members of Congress to express strong opposition to the “Credit Card Competition Act” (the “Act”) or other legislation that would impose network routing requirements on credit cards. They called the legislation “anti-consumer, anti-competitive, and cynical attempt by the largest global merchants and biggest grocery chains to obtain a subsidy for themselves at the expense of smaller competitors and consumers.”  

The bill targets the fees big box and large e-commerce retailers pay when a consumer swipes their credit card during a purchase. Banks argue that these fees are a critical source of revenue for the card issuing financial institution because it helps maintain system improvements, ensure online transaction safety, mitigate consumer fraud losses, and most importantly, grant financial institutions the ability to offer affordable financial services products, like checking accounts and credit cards, to their consumers.

According to the trade associations, the Act aims to expand the government’s interference in private market interchange fees by creating a new routing mandate for credit cards, essentially imposing a back-door price control on credit card interchange fees. The retailers would have the ability to choose which networks process all credit card purchases, for their own financial benefit, while erasing consumers’ choice and any expected reward points during transactions and exposing them to increased risk, all without any consequence. The bill would unwillingly lower financial institutions’ defenses when safeguarding consumer transactions and cause them to spend more money to maintain those necessary programs – the same money that would otherwise be used to increase access to financial services for those who need it most. Further, “mom and pop” retailers would be required to purchase new hardware to accept card payments. 

The trade associations urge opposition stating that the time and resources it would take to implement this policy would be exponential compared to the little benefit it would have on Main Street small businesses. --- Bryce J. Hunter