Monday, June 12, 2023
Only this time around, Sen. Durbin has support from both sides of the political aisle. First-term Senator J.D. Vance, R-Ohio, Senator Roger Marshall, M.D., R-Kan., and Senator Peter Welsch, D-Vt., all have signed on as co-sponsors of the legislation. And identical legislation has been introduced in the House by Representative Zoe Lofgren, D-Calif., and Lance Gooden, R-Texas.
In a summary of the bill, lawmakers argued that "Visa and Mastercard have structured their networks to avoid competitive market pressures on their fees…It's a take-it-or-leave-it system, and it is difficult for any merchant to stay in business without accepting cards from the Visa-Mastercard duopoly."
The Credit Card Competition Act takes aim at the problem by requiring merchants get to choose how their card payments get routed. And it gives the Federal Reserve one year to come up with regulations requiring the largest card-issuers in the country—those with more than $100 billion in assets – to offer two network choices for card-accepting merchants. Oh, and only one of those can be owned by Visa or Mastercard.
The addition of choice would incent Visa and Mastercard to hold down fees, the bill's authors explained in their summary document. They added that only "the biggest 30 or so" banks would be subject to the bill, and those banks would not be forced to add any particular networks to their cards, just as long as they are not the two major networks.
"[B]anks would select which network to add, as they currently do for debit cards, based on service, security and value that networks offer," the lawmakers stated. (Debit card routing choice was one of the mandates contained in the Durbin Amendment.)
"Right now, our country's credit card landscape does not reflect a competitive market, with just two major credit card companies setting prices for the nation's largest banks," Rep. Lofgren said. "Like when Congress enacted an alternate network option for debit cards, this reform will increase incentives for innovation, enhance payment security, and, most importantly, ease burdensome fees by allowing for credit card choice."
"Large credit card firms have consistently demonstrated prioritizing self-interest over our constituents," Rep. Gooden said. "The Credit Card Competition Act serves to address this imbalance and restore a healthy and competitive free market that operates in the interest of consumers."
Not surprisingly, the bill has the broad support of business associations, from the American Beverage Licensees to the Retail Industry Leaders Association, according to a list provided by lawmakers.
"By requiring more than one network option on credit cards, the Credit Card Competition Act would foster competition and transparency in the credit card market so that card networks would have to compete for business on fees and terms – just as we compete for our customers' business," said Leslie G. Sarasin, president and CEO of the Food Marketing Institute.
Not so, a group of 10 financial services associations argued in June 9 letter to lawmakers. "Contrary to its sponsors' misguided claims, the adverse effects of this bill are clear: fewer options for consumers, greater threats to consumer data privacy, weakened community banks and credit unions, and the disappearance of card rewards programs that families of all income levels use to stretch their budgets," the letter stated.
Besides, the dual-routing technology the bill calls for doesn't even exist, the letter noted. Perhaps the most damning argument put forth in the letter is that the proposed legislation goes against free market principles.
"This bill is not borne of real needs in the American payments system. It is about Congress picking winners and losers," the groups wrote. "While its sponsors speak of increasing options, this bill mandates that our members buy from certain companies, while prohibiting them from choosing better and more secure options." 
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