A coalition of financial advocacy groups wrote to members of Congress expressing strong disapproval of the Credit Card Competition Act (S. 1838) or any other expansion of the Durbin amendment ahead of the Nov. 19 hearing of the Senate Judiciary Committee.
The bipartisan bill, originally introduced last year by Sen. Richard Durbin (D-Ill), would prohibit certain credit card issuers with assets of over $100 billion from restricting the number of networks on which electronic credit card transactions may be processed.
“These transactions must be able to be processed on at least two networks and must not be restricted to networks (1) owned by or affiliated with the issuer, (2) designated as a national security risk, or (3) that have the largest market share of credit cards issued,” the bill states. “Additionally, credit card issuers are prohibited from imposing certain limitations on the routing of electronic credit transactions, such as through penalties for failure to meet a specified threshold of transactions on a particular payment card network.”
The trade organizations argued any legislative initiative proposing to expand the federal government’s authority to intervene in the U.S. credit card market would harm U.S. small businesses and consumers.
“The negative repercussions of the Durbin amendment are still being felt nearly 15 years after it was signed into law,” the groups wrote. “A 2022 report from the Government Accountability Office found that if the Durbin amendment ‘had not been implemented, 65 percent of noninterest checking accounts offered by covered banks would have been free.’ After the Durbin amendment went into effect, the Federal Reserve Bank of Richmond found 98 percent of merchants either raised prices or kept them the same—despite repeated promises any savings would be passed on to consumers through lower prices.”
The associations emphasized these proposed mandates would impact every card-issuing financial institution in the country, even the community banks and credit unions its supporters claim are exempt.
“In reality, a change this monumental cannot be walled off by some legislative carve out,” they said. “As we saw with the original Durbin Amendment, interchange revenue for supposedly exempt institutions declined by 30 percent, which makes it more difficult for these community banks and credit unions to serve their customers. That is why it is so unfortunate the committee did not allow one of these institutions to testify.”
Citing research ofthe Durbin-Marshall bill – which would expand the routing requirements imposed by the Durbin amendment to credit cards issued in the U.S. – the trade groups asserted the measure would raise the cost of checking account services to consumers by an estimated $1.3 to $2 billion a year. Low-balance account holders would bear a disproportionate amount of these costs, they argued, and the bill also would allegedly “open the door to fraud, hamper rewards programs, and limit the allocation of credit to individuals and small businesses.”
“Credit cards, debit cards, buy-now-pay later, checks, cash, ACH transactions, wire transfers, and real-time payment rails provide businesses and individuals with a multitude of payment options,” the associations wrote. “There is no evidence of significant concentration in the credit card market. In fact, the market for consumer cards concentration is far below the DOJ threshold and is far less concentrated than other industries.”
The trade advocates also expressed their “deep disappointment” with the committee’s decision to hold the hearing during the lame duck session of Congress and doing so without inviting community bankers or credit unions to testify.
The letter was endorsed by the American Bankers Association, America’s Credit Unions, Bank Policy Institute, Consumer Bankers Association, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Size Bank Coalition of America, and National Bankers Association.