Americans for Tax Reform: ATR Opposes Reintroduction of Credit Card Competition Act
Last week, Sens. Dick Durbin (D-Ill.), Roger Marshall (R-Kan.), Peter Welch (D-Vt.), and J.D. Vance (R-Ohio) reintroduced the Credit Card Competition Act (CCCA). Reps. Lance Gooden (R-Texas) and Zoe Lofgren (D-Calif.) introduced the House companion bill. ATR opposes the reintroduction of CCCA and urges members of Congress to oppose passage. If enacted the bill will likely do four things:
Largely eliminate credit card rewards programs
Put consumers personal privacy at risk because it will disincentivize future investment in fraud protection and enhanced cybersecurity
Reduce the availability of revolving lines of credit
Enable large retailers to pad their pockets while consumers and small businesses will see little to no savings at all
In response to CCCA’s reintroduction, Grover Norquist, President of Americans for Tax Reform, issued the following statement: The Credit Card Competition Act does not, as its name implies, promote competition. The bill is an expansion of big-government policies from the Dodd-Frank Act that largely regulated debit card rewards programs out of existence in 2010. The bill empowers the Federal Reserve to regulate consumers’ credit card purchases by restricting how payments can be routed over credit card networks and forcing networks to share proprietary payment technology. These legislative provisions will reduce the interchange fee revenue that is used by credit unions and small community banks to fund better consumer data privacy protections and credit card rewards programs through points, cash back, and co-branded airline cards. This will only limit service options and perks that millions of Americans who choose to use electronic forms of payment enjoy every day. Lining woke special interest groups’ pockets should not be favored over the best interests of the consumer. ATR and the greater free-market community has consistently opposed this legislation: Coalition Letters
In March 2022, ATR led a coalition letter establishing a broad center-right opposition to the policy of extending the Durbin amendment to credit cards.
In August 2022, ATR organized a coalition letter with nearly 30 free-market groups urging members of Congress to oppose the CCCA.
In October 2022, ATR organized a coalition letter opposing the addition of the CCCA and a separate credit card regulation amendment from being added to the National Defense Authorization Act for Fiscal Year 2023.
In February 2023, Townhall published an op-ed by ATR that explains how legislation like CCCA will put consumer privacy at risk.
In 2022, RealClearMarkets published one ATR op-ed on how CCCA empowers the Federal Reserve to restrict consumer choice, and another op-ed on the effect of government intervention in payment networks.
In August 2021, The Hill published an ATR op-ed on why expanding the Durbin Amendment (regulation of debit cards in the Dodd-Frank Act) to apply to credit cards is a bad idea.
In March 2022, ATR published an article outlining all the efforts it had led in the previous year to oppose the credit card regulations pushed by Democrats.
In September 2022, ATR published a piece that addressed the many problems in the Credit Card Competition Act of 2022.
In January 2023, ATR created a post that functioned as a primer on CCCA and credit card regulation. The article explains the history of and outlook for credit card regulation while also articulating why the center-right community remains so steadfastly opposed to it.
ATR will continue to oppose CCCA and any bill that attempts to impose government restrictions that will largely eliminate credit card rewards options for consumers and limit the amount of revenue that can be used for consumer data privacy and security. For more articles and information on the harmful effects of this bill, you can check out saveourpoints.org.
Page 2 of 2 Dear Member of Congress: We, the undersigned organizations, oppose the inaccurately named Credit Card Competition Act of 2022 (S. 4674) as filed as Senate amendment 6201 to the substitute amendment (SA 5499) proposed to the National Defense Authorization Act for Fiscal Year 2023 (H.R. 7900). The amendment is a backdoor price control, and extension and expansion of the Durbin amendment as enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203). As written, the amendment directs the Federal Reserve to draft rules requiring credit cards issued in the United States to offer at least two unaffiliated payment network options for point-of-sale and online transactions. According to the amendment, the two networks may not both be Visa and Mastercard, because they “hold the 2 largest market shares with respect to the number of credit cards issued in the United States.” However, should market share switch hands to new firms, the routing mandates will no longer apply. The amendment also mandates that the proprietary security of the credit cards function so that all networks are available for retailers to pick and choose—consumers get no say whatsoever. In fact, the amendment never mentions consumers, nor how they will benefit. It is abundantly clear that special interest groups are using the federal government to alter the credit card market to benefit themselves and not consumers. This is textbook rent seeking behavior, anathema to free market principles, and should be staunchly opposed by Republican lawmakers. Furthermore, we oppose Senate amendment 6201 for the following reasons:
The amendment does not promote competition, instead it dramatically expands the role of the federal government to overregulate the market for credit cards. Today, requiring multiple dual-message networks to function over one card is technologically infeasible. The cost of overhauling our current credit system to comply with the mandates in the amendment could cost up to $5 billion.
The mandates in the amendment are so costly that more than $60 billion in rewards that consumers receive every year would largely disappear. According to the International Center for Law & Economics, “86% of credit cardholders have active rewards cards, including 77% of cardholders with a household income of less than $50,000.”
The amendment authorizes the federal government to intervene in contracts between private parties. The federal government should not be interfering in private contractual agreements. This encroachment will force small banks and credit unions to severely limit or cease providing co-branded cards that millions of consumers use every day. This is similar to how Biden’s Securities and Exchange Commission is attempting to dictateprovisions of contracts between private fund advisers and investors.
There is no evidence that this amendment will pass savings down to consumers. A report from the Government Accountability Office stated that if the regulations in the Durbin amendment “had not been implemented, 65 percent of noninterest checking accounts offered by covered banks would have been free.” Since the enactment of the Durbin amendment, about 22% of retailers have raised prices on consumers while only 1% lowered prices. Additional regulation on credit interchange will affect fees and interest in the credit market, thus increasing costs for consumers.
Because the amendment forces credit cards to allow access to all networks, proprietary technology will be exposed to competing networks, destroying incentives to create new and innovative fraud protection and cybersecurity. As one paper points out, the routing mandates “largely undermine the economics of networks and issuers.”
The amendment is a perfect example of Congress ceding its Article I authority to the Federal Reserve. All the provisions of this amendment require the Federal Reserve to draft rules to carry out its mandates.
We also oppose the inclusion of Senate amendment 6174. The amendment requires the Secretary of Defense and the Secretary of the Treasury to submit an unnecessary and redundant report to Congress on the user fees charged on credit and debit transactions at commissary stores and morale, welfare, and recreation (MWR) facilities for veterans and their caregivers. This amendment is a Trojan horse for additional regulations to the credit card market. We oppose Senate amendment 6174 for the following reasons:
The amendment is unnecessary and redundant because the Department of Defense, in consultation with the Treasury Department, is already conducting the oversight required in the amendment. The implementing regulations state that “On a periodic basis, the Department plans to review with Treasury actual costs incurred by the Treasury on credit card and debit card use by individuals who are eligible solely under the statute and adjust corresponding user fees as necessary.”
The amendment is a political ploy to justify the eventual adoption of additional credit card regulations.
The amendment makes no considerations for consumer savings, and targets banks, credit unions, and payment card networks for future regulation. The analysis in the implementing regulations already considers the savings commissary shoppers will enjoy.
Based on the points made above, we oppose Senate amendments 6201 and 6174. We encourage all lawmakers to oppose these amendments. Sincerely, Grover Norquist, President, Americans for Tax Reform Adam Brandon, President, FreedomWorks Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council Eli Lehrer, President, R Street Institute Steve Pociask, President / CEO, American Consumer Institute Heather R. Higgins, CEO, Independent Women’s Voice Jeffrey Mazzella, President, Center for Individual Freedom Pete Sepp, President, National Taxpayers Union David Williams, President, Taxpayers Protection Alliance Phil Kerpen, President, American Commitment James Taylor, President, The Heartland Institute Brent Wm. Gardner, Chief Government Affairs Officer, Americans for Prosperity John Berlau, Director of Finance Policy, Competitive Enterprise Institute Ryan Ellis, President, Center for a Free Economy Ashley Baker, Director of Public Policy, The Committee for Justice James Erwin, Executive Director, Digital Liberty Paul Gessing, President, Rio Grande Foundation Gregg Keller, President, Missouri Century Foundation Yaël Ossowski, Deputy Director, Consumer Choice Center Bryan Bashur, Executive Director, Shareholder Advocacy Forum Gerard Scimeca, Chairman, Consumer Action for a Strong Economy Andrew Langer, President, Institute for Liberty Jessica Anderson, Executive Director, Heritage Action for America Tim Jones, Fmr. Speaker, Missouri House, Chairman, Missouri Center-Right Coalition Douglas Carswell, President & CEO, Mississippi Center for Public Policy Brian Balfour, Senior Vice President of Research, The John Locke Foundation Bethany Marcum, CEO, Alaska Policy Forum Adam Schwemley, Board of Directors, Alaskans for Tax Reform Chris Nelson, Board of Directors, Alaskans for Tax Reform Wiley Brooks, Alaska Constituent Peter D. Brown, Alaska Constituent Glen Biegel, Alaska Constituent Forrest Nabors, Alaska Constituent Dustin Gawrylow, Managing Director, North Dakota Watchdog Network