CUNA, NAFCU & Others Plea to Lawmakers: Kill the Credit Card Competition Act
A letter to Senate and House leaders comes as senators try attaching the bill to a bill funding the government.
Eleven credit union, banking and payments groups sent a letter on Friday to the leaders of the U.S. House of Representatives and Senate in an effort to squash the Credit Card Competition Act as two senators are attempting to attach the controversial bill to the Senate version of the government funding bill.
Federal funding for the government is set to run out on Sept. 30. And officials from the 11 groups have found themselves in a race against time to stop the Credit Card Competition Act – a bill credit union leaders believe would cause severe harm to credit unions in the card payments landscape.
The bill, which has the backing of retailers, would require the Federal Reserve to issue regulations to ensure that large financial institutions cannot restrict the number of networks on which an electronic credit transaction may be processed to less than two unaffiliated networks, at least one of which must be outside of the top two largest networks, which are Visa and Mastercard.
Friday’s joint letter to lawmakers was signed by the American Bankers Association, Association of Military Banks of America, Bank Policy Institute, Consumer Bankers Association, CUNA, Defense Credit Union Council, Electronic Payments Coalition, Independent Community Bankers of America, Mid-size Bank Coalition of America, NAFCU and the National Bankers Association.
The letter stated, “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 Durbin-Marshall 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 to pad the profits of the largest e-commerce and multi-national retailers who are raising prices on American families far more than the real rate of inflation.”
If the bill passes, the groups argued that potentially unintended consequences will occur as a result. For instance, the legislation will drastically reduce interchange fees that credit unions rely on to help pay for fighting credit card fraud.
“Banks and credit unions help to cover a consumer’s costs when fraud occurs,” the letter stated. “Any reduction in interchange fees would directly affect bank and credit union investment in fraud management systems and processes that are dedicated to reducing fraud risk in the system—forcing institutions to increase costs to cover these necessary expenses.”
On Thursday, CUNA and the leagues issued an “action alert” asking credit unions to use their Grassroots Action Center to contact lawmakers to “oppose attaching the big box interchange bill” to the legislation to fund the federal government.