Joint Trades Hill Letter on “Credit Card Competition Act of 2022”
Dear Speaker Pelosi, and Minority Leader McCarthy:
The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Electronic Payments Coalition, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions, and National Bankers Association write to express our strong opposition to the “Credit Card Competition Act of 2022” (H. 8874) introduced by Representatives Peter Welch (VT) and Lance Gooden (TX).
Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and benefit big box retailers by reducing the number of credit card issuers competing for consumers’ business, removing a consumer’s choice of preferred card network, wringing out the competitive differences among card products, limiting popular credit card rewards programs, and putting the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board. The Gooden-Welch bill accomplishes this by using legislation to circumvent the free market to award private-sector contracts to a small handful of the sponsors’ favored payment networks in order to pad the profits of the largest ecommerce1 and multi-national2 retailers who are raising prices on American families far more than the real rate of inflation3 . As Federal Reserve Board Vice Chair Lael Brainard stated this month, retailer profits are near their highest levels since World War II4 , but the global retail giants are demanding that Washington intervene on their behalf, even as they reject measures to cap their sudden retail price increases.
Contrary to its sponsors’ misguided claims, the adverse effects of this bill are clear: fewer options for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions, and the disappearance of card rewards programs that families of all income levels5 use to stretch their budgets.
The federal government’s attempt to impose price controls by regulating interchange through Section 10756 (Durbin Amendment) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the DoddFrank Act) is the purest example of a failed government policy. If the goal of the requirement that credit unions and banks enter contractual relationships with many payment networks was to reduce costs to consumers, then it failed. The Durbin Amendment has resulted in additional compliance burdens and related business costs to financial institutions, a reduction in interchange revenue, and a massive transfer of money to the largest retailers7 . Since the enactment of the Durbin Amendment in 2010, the financial services industry (comprised of institutions of all sizes and charters) has been clear, consistent, and in lockstep in our opposition to that destructive policy. The Gooden-Welch bill manages to take a bad policy and makes it worse.
While big merchants are fighting against bicameral legislation that would scrutinize their spiraling price increases amid rocketing retail profits8 , they eagerly support the Gooden-Welch federal price controls and fail to mention that credit card acceptance9 fees were recently reduced for small merchants and food stores. We urge you to reject this cynical manipulation of our nation’s payments system for narrow financial gain for the nation’s largest retailers.
