Americans will lose big if Durbin-Marshall bill passes

A new study suggests an economic slowdown costing $227 billion in lost economic activity and more than 150,000 jobs if Congress passes the Credit Card Competition Act. That legislation was introduced in 2023 by Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan., but has yet to be introduced in the current session of Congress.

The study, conducted by Oxford Economics, suggests the bill would spark a travel slowdown that could impact jobs and cities that rely heavily on tourists – especially tourists who use credit and debit card rewards to finance their trips.

Industries reliant on discretionary spending, such as entertainment and recreation, hotels, dining and catering, retail trade, and transport services are estimated to be most affected for several years beyond the four-year scope of the study, Oxford Economics wrote.

Not included in the analysis are the costs associated with regulation, including the investments needed to support interoperability between networks and issuing new cards, which also are expected to impact the industry for several years.

Richard Hunt, chairman of the Electronic Payments Coalition, which commissioned the study, said the new study proves the Durbin-Marshall bill is a jobs killer.

"The U.S. economy cannot afford a quarter-trillion dollar hit and workers in cities across the country should not have to suffer so corporate megastores can pad their profits," Hunt said. "Make no mistake, this bill would create a completely avoidable downturn in local communities. It is anti-growth and dangerous economic policy."

It's all about rewards

The mandates contained in the Credit Card Competition Act would force card issuers to pare back rewards programs and benefits, the study found. This contraction could restrict consumer discretionary spending by $80 billion and result in a loss of up to $227 billion in economic output over four years.

Oxford's forecast factors in the market response to the legislation that mirrors the outcome after regulation of the debit card market, as required by the Durbin Amendment to the Dodd-Frank Act. Following implementation of debit interchange regulation, as required under the Durbin Amendment, average interchange fell by 100 basis points, or approximately 50 percent.

"The potential national impact of this bill is significant; however, the effects at the local level are even more pronounced," said Neil Walker, managing director of macro modelling and scenarios at Oxford Economics. "The data highlights the outsized impact this policy could have on areas dependent on travel and hospitality-driven revenues, which are especially vulnerable to shifts in rewards-driven consumer behavior."

Some of the regions that would see the greatest impact include: the state of Hawaii; Miami; Las Vegas; Nashville; Orlando, Fla.; Myrtle Beach, S.C.; Aspen/Vail/Brekenridge, Colo; and Mt. Rushmore in Keystone, S.D.

"This study confirms what we already knew: the Durbin-Marshall credit card bill would be devastating for South Florida's economy and small businesses," said Liam Lopez, president and CEO of the South Florida chamber of Commerce. "Tourism and hospitality are among South Florida's top economic drivers, generating billions in annual revenues, much of it fueled by rewards-based travel."

Oxford Economics' research came up with an estimate that the loss of economic output for Miami over four years would be $6.5 billion.

Impact on rewards, and travel and tourism

Travel and tourism are vitally important to the U.S. economy, the research noted. Travel accounted for $1.2 trillion in direct spending in 2022, which produced an economic footprint of $2.6 trillion. Travel supported nearly 15 million American workers in 2022 and directly employed 8 million.

"Businesses and families across the Vail Valley rely on the revenue tourism brings to our community," said Chris Romer of the Vail Valley Partnership. "This study makes plain the destructive impact the Durbin-Marshall credit card bill would have on tourism across the country. Here in Colorado, we would see losses of over $200 million in a four-year period."

The Credit Card Competition Act, when introduced in the last session of Congress, was backed by both Republicans and Democrats in the Senate and the House.

While the legislation has yet to be introduced in the current session of Congress, the EPC has placed advertisements in recent weeks on television stations serving Washington, D.C., Maryland and Virginia denouncing the legislation, homing in on the impact the legislation would have on the card rewards programs consumers have come to rely on.

According to the research, seven in 10 Americans hold a credit card that offers rewards of some sort. Airline, hotels, car rentals and dining are the most popular categories of spending and redemption tied to those cards, In 2022, miles accrued from airline credit cards alone paid for an estimated 15 million domestic trips that supported $23 billion in economic activity, according to the Oxford Economics study.

Oxford Economics is a commercial venture of Oxford University's business college that specializes in economic forecasting and modeling. It is headquartered in Oxford, England.

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