Centennial State News

The head of the Independent Community Bankers of Colorado (ICBC) said that bank customers' private data would be at risk if pending federal credit card regulations became law.

The bill, S. 1838, or the “Credit Card Competition Act” (CCCA, S. 1838), would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. Opponents to the bill argue that if given the choice, retailers would likely choose cheaper, less secure networks for processing transactions, thereby exposing consumers to increased securities and fraud risks.  

“The ICBC and our member bankers do indeed oppose this bill,” Michael Van Norstrand, executive director of ICBC, told Centennial State News. “Even though it is purportedly targeted at banks with over $100 million in assets (ICBC does not have any members close to that size), we are nonetheless concerned that community banks would be forced to subsidize costly system-wide changes and upgrades and customer data would be at risk while benefiting the big box retailers.”

ICBC is a trade association that represents community banks across the state. Established to advocate for community banking, ICBC provides its members with education, networking opportunities, and regulatory support.

Van Norstrand also shared a letter to Congressional leadership that his organization signed in July 2023 calling S. 1838 a "poorly conceived" bill that would "exclusively benefit the largest 'big-box' merchants including Amazon, Walmart, and others."

"If enacted, this bill would force an overhaul of the payments landscape at significant systemic cost – a cost ultimately borne by consumers and the community banks that serve them," said the letter.

He also said to an April poll conducted by Morning Consult for the Independent Community Bankers Association showed that 66% of adults, including 72% of Democrats and 67% of Republicans, feel "box box stores would likely choose cheaper, less secure networks to process credit card transactions" if S.1838 became law. 

71% of of survey respondents said "changing the technology that is used to conduct credit transactions at the register is risky."

The ICBC joins the Colorado Bankers Association (CBA) in opposing the bill. CBA President and CEO Jennifer Waller told Centennial State News in June that the bill "would increase the likelihood of fraudulent activity on individuals’ cards."

Colorado ranked No. 24 in the country for per-capita credit card fraud reports in 2023, reported Centennial State News in April. 

Aside from the potential future issues of security and fraud, Waller also pointed to customer rewards possibly being threatened if the bill were to pass.

“In addition to an increased potential of fraud, the bill, if enacted, may jeopardize credit card reward programs,” Waller stated.

A report released last month by the Electronic Payments Coalition found that, since 2020, the ownership of rewards cards has grown fastest among low-to-moderate-income individuals.

Waller said the CBA had communicated its concerns on the legislation to the state’s two U.S. Senators, Michael Bennet (D-CO) and John Hickenlooper (D-CO).

Glenn Grossman, the Director of Research at financial advisory firm Cornerstone Advisors, concurred that if the CCCA is passed, it could lead to an increase in credit card fraud.

“If the CCCA were to be approved, the routing of credit card transactions would move from a ‘single pipe’ to ‘multiple pipes’ of data flowing from merchants to issuers,” Grossman told Federal Newswire.

“Today, card issuers depend on the networks to profile and identify fraud. They see all the transactions on their network and have developed fraud detection capabilities that would not be possible in a fragmented structure the CCCA would create,” Grossman said.

Grossman added that Visa has invested billions on fraud detection.

“The investment builds trust and in return consumers use their credit cards,” said Grossman. "Zero liability means something to consumers. With the CCCA, it is possible that promise is gone."

In a report released in July 2023, “The True Impact of Interchange Regulation: How Government Price Controls Increase Consumer Costs and Reduce Security,” Grossman wrote that studies show 79% of consumers choose credit cards as a payment option because of their data security.

Grossman said that, under the legislation, credit card authorizations would be allowed to flow across many “pipes” which would eliminate much of the “fraud fighting value that Visa and MasterCard have implemented.”

The bill would not require new networks to provide fraud detection, Grossman explained.

“It is expected these new networks would rather just route data, not ensure the authorization is legitimate. It is a fraudster’s dream come true!” he said.

The Federal Trade Commission reported receiving 114,348 complaints of fraud in which the payment method was credit card in 2023. Those fraud complaints accounted for $246.1 million.

The FTC also reported receiving 416,582 reports of credit card identity theft in 2023.

The bill is currently pending before the Senate’s Committee on Banking, Housing and Urban Affairs.

Where did your state rank in 2023 rank for credit card reports per capita?

Source: WalletHub / Federal Trade Commission data

State	Credit Card Fraud Reports per Capita
Florida	22.01
District of Columbia	21.76
Georgia	19.59
Nevada	18.3
California	16.08
Delaware	15.95
Pennsylvania	15.06
Texas	13.37
Maryland	13.05
South Carolina	12.79
New York	12.65
Louisiana	12.51
New Jersey	12.46
Illinois	12.44
Arizona	11.21
Alabama	10.62
Massachusetts	10.01
Michigan	9.52
North Carolina	9.52
Connecticut	9.41
Mississippi	8.98
Virginia	8.95
Ohio	8.86
Colorado	7.78
Rhode Island	7.77
Indiana	6.95
Tennessee	6.68
Nebraska	6.09
Kansas	6.04
Washington	5.8
Arkansas	5.75
Missouri	5.66
Oregon	5.53
New Hampshire	5.48
Wisconsin	5.41
Utah	5.08
Minnesota	5
Oklahoma	4.89
Hawaii	4.8
Iowa	4.69
Kentucky	4.3
New Mexico	4.29
North Dakota	4.22
Idaho	4.02
Wyoming	3.82
Maine	3.78
Montana	3.76
Alaska	3.64
West Virginia	3.63
Vermont	3.49
South Dakota	3.33