Centennial State News

The Electronic Payments Coalition (EPC) said this week that it "applauds Congress" for ending the 118th Congress' legislative session without passing the "Credit Card Competition Act of 2023" (CCCA), a bill that is opposed by the Colorado Bankers Association (CBA) and Independent Community Bankers of Colorado (ICBC).

"EPC applauds Congress for repudiating the experimental, draconian Durbin-Marshall Credit Card Bill—a proposal that would undermine the security, rewards, and convenience of Americans’ credit cards," said Richard Hunt, executive chairman of EPC, in a statement. "This reckless legislation sought to impose a government takeover of credit cards, allowing corporate mega-stores to pocket larger profits at the expense of data security and fraud protections.

The EPC is a trade association that represents credit unions, community banks, and payment card networks. The coalition advocates for policies that protect and promote the use of electronic payments. 

Originally sponsored by U.S. Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kans.), the CCCA, or 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 CBA’s President and CEO, Jenifer Waller, told Centennial State News in June 2024 that her group opposes the CCCA on more than one front, beginning with credit card security.

“We do believe that provisions of the bill, if enacted, would increase the likelihood of fraudulent activity on individuals’ cards,” Waller said.

Colorado ranked No. 24 in the country for per-capita credit card fraud reports in 2023, reported Centennial State News  on April 22.

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.

Michael Van Norstrand, executive director of ICBC told Centennial State News in August that his organization opposes the CCCA.

The ICBC and our member bankers do indeed oppose this bill,” said Van Norstrand. “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.”

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.

The bill applies to credit cards what a similar measure in 2010, often referred to as the “Durbin Amendment,” applied to debit cards. The 2010 measure was a requirement of the “Dodd–Frank Wall Street Reform and Consumer Protection Act.” 

A 2014 George Mason University study found that the 2010 “Durbin Amendment” led to a 50% reduction in the number of “fee-free” accounts offered by banks between 2009 and 2013, and doubled average monthly fees on “non-free” current bank accounts. 

The study also said the measure resulted in an increase of 1 million "unbanked" Americans in the year after the measure was enacted. 

Marli Collier, managing director at Airlines for America (A4A), said the proposed bill could also negatively impact Iowa's travel industry and economic health by threatening access to credit card reward programs.

“Airline credit card rewards play an invaluable role in helping to grow Iowa's travel and tourism industry," Collier told Hawkeye Reporter. "Consumers love their rewards cards because they get great value with them, but the Durbin-Marshall Credit Card Competition Act would threaten credit card rewards programs, undermine jobs and negatively impact economic growth across Missouri. Lawmakers in Congress must consider the negative impact that this legislation will have on the consumers and communities across the country that benefit from airline credit cards.”

A report released last year by Collier's organization said 26,096 visitors used credit card reward points to visit the Hawkeye State in 2022, which supported 342 Missouri jobs and had a total economic impact of $37.6 million. These numbers were compiled via a survey of A4A’s member companies. 

Glenn Grossman, the Director of Research at financial advisory firm Cornerstone Advisors, told Federal Newswire earlier this year that the bill could also lead to increased credit card fraud risk. 

“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,” said Grossman. “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 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.