Leaders of the US credit union movement are calling on lawmakers to reject the proposed Credit Card Competition Act, warning it would harm consumers, weaken data security, and reduce access to affordable credit.
Supporters of the bipartisan bill say it will break up a Visa-Mastercard duopoly by requiring large banks to offer more choice to merchants in terms of what payment network can be used for processing their credit card transactions.
The goal is to bring down interchange fee rates by increasing competition in the market, bringing savings which can be passed on to customers.
But trade body America’s Credit Unions said the proposals are “misguided”, arguing they would “harm consumers, small businesses, and community financial institutions while delivering a windfall to corporate megastores”.
The apex, backed by state credit union leagues and associations, has written a joint letter with the Defense Credit Union Council and Independent Community Bankers of America, urging lawmakers in Congress to reject the bill.
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“Despite claims of increased competition, the Credit Card Competition Act would do the opposite – reducing consumer choice, weakening fraud protections, and consolidating advantages for the largest retailers,” the letter reads. “Research from the University of Miami finds small businesses would be placed at a further competitive disadvantage, with nearly all savings flowing to retailers with more than US$500m in annual sales.”
The letter says the bill extends the Durbin Amendment, which required debit card issuers to offer merchants at least two unaffiliated payment networks for processing transactions.
Durbin “has cost consumers access to free checking,” the letter adds, “and the CCCA could cost the economy $228bn and 156,000 jobs by undermining rewards programs, according to Oxford Economics.”
The bill would also significantly increase fraud, the letter argues.
“A Texas A&M study found it could double card fraud to $20bn over the next decade, while at the same time reducing financial institutions’ ability to invest in fraud protection and data security,” it says.
It adds: “Claims that community financial institutions are exempt are equally misleading. Federal Reserve data show community financial institutions experienced a 30% drop in interchange revenue after the original Durbin Amendment, despite similar exemptions.
“The same outcome would occur here, reducing funds used for lending and investment in local communities.”
