John McKechnie, Principal, McKechnie LLC
Sens. Dick Durbin (D-IL.), Roger Marshall (R-Kan.), J.D. Vance (R-Ohio) and Peter Welch (D-Vt.) on June 7 introduced the Credit Card Competition Act (CCCA, S. 1838), which would require banks with more than $100 billion in assets to offer merchants at least two networks to process credit cards. Under terms of the bill, at least one of these payment rails could not be owned by Visa or Mastercard. A House companion bill, HR 3881 was introduced by Rep. Lance Gooden (R-TX).
DCUC and other credit union trades pushed back immediately, saying the bill would reduce consumer options on credit transactions, weaken cybersecurity protections, and eliminate funding for popular credit card rewards programs.
They also pointed out the promised consumer savings from the 2010 Durbin Amendment cap on debit transaction fees never materialized. This contention is backed up by a 2015 Richmond Federal Reserve study which found that 77.2% of merchants kept prices the same in the wake of the Durbin debit rules, 21.6% actually increased prices, and only 2.1% passed on lower debit costs to consumers.
Credit unions trades are part of the Electronic Payments Coalition, a financial services alliance formed to fight the retailer attempt to upend the payment system. The coalition is running a series of ads aimed at educating Congress on the issue, pointing out the failed track record of the previously mentioned 2010 Durbin debit card law and pushing back against inaccuracies in the current retailer campaign.
The retailer lobby has also made an early communications blunder in this new Durbin fight; reports from Capitol Hill say merchant groups are openly calling for the use of cheaper, untested payment systems, with no regard for data security. This has raised eyebrows among lawmakers who are concerned that those alternative systems are less secure against cyberattacks. As one House Financial Services Committee staffer noted “retailers are bragging about using second-tier payment rails, and don’t seem concerned that there is a security trade-off. That’s not a good look for them.”
Despite the quick and, so far, effective counters by credit unions and other financial institution allies on the issue, concerns remain. The retailer lobby is large and well-funded by Big Box stores such as Target and Walmart and has made CCCA their number one legislative priority. A myriad of merchant trade groups has swarmed Capitol Hill since early June, including the National Grocers Association, the National Restaurant Association and the National Federation of Independent Businesses, asking for action on the bills.
As reported in past ALERTS, Senator Durbin may attempt to attach his bill as an amendment to the must-pass Farm Bill later this summer. Or if that fails, there are other possible legislative vehicles later this year.
Either way, all credit unions must remain extra-vigilant as retailer supporters of these government price controls attempt, once again, to mislead Congress into passing a bad and unworkable law.