On April 9, 2024, the Senate Judiciary Committee will hold a hearing on credit card competition. Senator Dick Durbin (D-IL) requested testimony at the hearing from the following Chief Executive Officers who have publicly opposed his Credit Card Competition Act: Ryan McInerney (Visa), Michael Miebach (Mastercard), Scott Kirby (United Airlines), and Robert Isom (American Airlines).
Last Summer, Senator Dick Durbin and Representative Lance Gooden introduced “The Credit Card Competition Act of 2023”(a/k/a Durbin 2.0) to enhance competition and reduce interchange fees on credit cards by requiring certain credit card issuers with over $100 billion in assets to enable at least two credit card networks on their credit cards, and also requiring at least one of those networks to be a network other than Visa and Mastercard. The Act does not apply to networks that are the card issuer, such as cards issued by American Express and Discover. Since being introduced on June 7, 2023, the bill remains in the Senate Banking Committee and the House Financial Services Committee.
In the press release announcing the hearing, Senator Durbin blames the “aggressive” opposition of Visa, Mastercard, American Airlines, and United Airlines for the failure of his bill to gain any traction. Disregarding the uncertain impact of routing restrictions raised in the December 2023 Congressional Research Service report, titled How the Credit Card Competition Act of 2023 Could Affect Consumers, Merchants, and Banks highlighting potential issues for Congress, the press release touts that the bill “is estimated to save merchants and consumers $15 billion each year.” The Congressional Research Service found, however, that “it is not clear whether retailers would pass interchange savings on to consumers.” And apparently disregarding the historical data showing that the Durbin Amendment regulating interchange caused the elimination of debit card reward programs across the country, Senator Durbin further argues that any claims made by these companies that his bill will affect credit card rewards programs are false.
In October 2023, the Federal Reserve Board issued a proposal to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The Consumer Bankers Association commissioned research on debit card interchange fee limits and the potential implications if the proposal is finalized. This research concludes that it is “virtually impossible” to prove or measure any merchant or consumer savings and consumers can expect to pay an extra $1.3 billion to $2 billion annually in bank account fees through higher monthly maintenance fees or increases to other service fees.
Ballard Spahr’s Consumer Finance Monitor Podcast has released two recent episodes addressing Durbin 2.0 and the Fed’s proposal to lower debit card interchange fees:
- “Understanding the Credit Card Competition Act a/k/a Durbin 2.0” episode that examines each party’s role in a credit card transaction, discusses how the bill’s requirements would operate, assesses the principal arguments made in support of or in opposition to the bill, and discusses the bill’s political prospects.
- “Understanding the Federal Reserve Board Proposal to Lower Interchange Fee Cap for Debit Card Transactions” episode that discusses the impacts of the current debit interchange fee cap, the Federal Reserve Board’s rationale for its new proposal and related study, the proposal’s implications for each of the affected parties, and the potential impact of the U.S. Supreme Court’s pending decision on Chevron deference.
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