Action Needed on Two Bills: Please Send Messages to Lawmakers

It’s all-hands-on-deck as credit union advocates are urged to oppose two detrimental pieces of legislation. A harmful bill in Washington, D.C. would severely impact members by changing the credit card interchange system, while another adverse bill in Sacramento would expand liability in elder financial abuse cases.

In both the U.S. Congress and California State Legislature, letters continue pouring into lawmakers’ offices — but MANY MORE ARE NEEDED to send a message that makes the voice of credit unions heard.

So far, more than 5,000 messages from California and Nevada credit union advocates have been sent to Capitol Hill legislators opposing S. 1838 and H.R. 3881 (Credit Card Competition Act) on interchange. Please share and promote this campaign to your staff and board members.

Meanwhile, over 750 messages have been sent to Sacramento lawmakers opposing Senate Bill 278 (elder financial abuse liability). Please also share and promote this campaign with your staff and board members if your credit union has a footprint in California.

Ask CA Lawmakers to Oppose SB 278 Unless Amended
Senate Bill 278 in the California Legislature deals with elder financial abuse liability and was authored by Sen. Bill Dodd (D-Napa). This bill would significantly expand the liability of credit unions and even their employees in instances of elder financial abuse.

The California Credit Union League is asking state lawmakers to oppose SB 278 unless it’s amended to make the bill workable for credit unions. As drafted, the bill applies to all transactions, contains personal liability for staff who are supervisors, and has a completely unworkable “safe harbor” that the League feels will lead to rapid erosion of senior members’ relationships with their credit unions.

Credit unions have produced amendments to the bill that the League feels will lead to more prevention of fraud while not destroying the banking relationship of seniors and their credit unions. These amendments would focus on transactions over $10,000. They offer a safe harbor if a credit union implements one of the following actions:

• A signed warning.
• Contacting a joint account holder.
• Reporting and holding for 15 days.

Please ACT NOW to preserve your ability to serve seniors! Take action through our Connect for the Cause campaign TODAY to enshrine credit unions’ ability to serve the senior population! If you have any questions or issues, email Leagues Senior Vice President of State Government Affairs Robert Wilson.

Ask Congress to Oppose Credit Card Interchange Bill
S. 1838 and H.R. 3881 (the Credit Card Competition Act) would severely impact credit unions and their members by changing the credit card interchange system. Here are key facts to remember as you spread the word with employees, volunteers, and credit union advocates:

• The interchange system works. Interchange fees are only a fraction of a cent per dollar transacted. However, these fees are key to protecting consumer information. Interchange fees help pay for fraud detection, replacing credit cards and reimbursing fraudulent purchases. Based on a survey from the Credit Union National Association (CUNA), 95 percent of respondents say the current interchange system works and 92 percent want personal information secured from data breaches.
• The Credit Card Competition Act would hurt your credit union. This bill would force card issuers to offer credit cards that can be processed on multiple networks, not just Visa or MasterCard. The bill takes power away from card issuers, like credit unions, and puts it in the hands of retailers and merchants. Vendors would have the option to choose what network a credit card transaction is paid on. This makes it harder for credit unions to predict revenues from credit card interchange fees. It also means that if a merchant chooses to use a poorly secured credit card network and there’s a data breach, credit unions may be forced to take a loss.
• The Durbin Amendment from 2010 is a broken promise. The amendment set a cap on debit card interchange fees. Since then, there has been a 34 percent reduction in debit interchange revenues among credit unions. The broken promise of the Durbin Amendment is that merchants would pass savings along to consumers. Nevertheless, a survey conducted shortly after the implementation of the Durbin Amendment revealed that only 1.2 percent of merchants actually reduced their costs.
• You can view the Credit Card Competition Act of 2023 Frequently Asked Questions (FAQ) sheet here, as well as the bill’s language here. You can also read a report released by Cornerstone Advisors: The True Impact of Interchange Regulation: How Government Price Controls Increase Consumer Costs and Reduce Security.

Today, the Credit Card Competition Act threatens to change the interchange system — this time for credit cards. The Leagues do not want to see consumers and credit unions losing out to big retailers, so please make your voices heard by sending a pre-written letter TODAY to your two senators and member of Congress, urging them to stand up for local credit union members by opposing this legislation.

If you have any questions or issues, please email Leagues Senior Vice President of Federal Government Affairs Stephanie Cuevas.

Further Details on the ‘Credit Card Competition Act’
The Credit Card Competition Act (CCCA) of 2023 is substantively identical to the CCCA of 2022, but with two notable changes:

• The current CCCA adds that routing cannot be limited to two networks if any of the networks are included on the list of “designated national security risks” under Sub-paragraph D.
• The current CCCA requires the list of “designated national security risks” to be updated every two years.

Under the current CCCA, the Federal Reserve would issue regulations requiring credit card issuers with more than $100 billion in assets to include at least two unaffiliated networks on which an electronic credit transaction can be processed. Additionally, the two networks cannot be the networks holding the two largest market shares of credit cards issued in the United States by licensed members of such networks (as determined by the Federal Reserve Board of Governors at the time the regulations are issued).

More information can be found on the cost of data breaches, how interchange fees protect consumers from data breaches, and the economic impact of amending interchange regulations by visiting the Interchange Works: Protect My Card site.

During the week of June 12 – 16, CUNA and organizations representing the entire financial services industry wrote House leaders in strong opposition of the interchange bill (H.R. 3881). The letter follows a similar one sent by the organizations to Senate leaders last week. The letter notes that the legislation would:

• 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.
• 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.

It also states that:

• Interchange is the cost retailers pay to their financial institution or card processor in return for many benefits that come with card acceptance, including higher sales, a larger customer base, reduced cash-handling risks, reduced bounced checks, and guaranteed payment.
• The dual routing technology in the bill does not exist today because of the nature of a credit transaction as an extension of unsecured credit to consumers. Credit cards are very different than debit cards and should not be regulated as such.
• The legislation would hand control of the nation’s credit card system to breach-prone merchants. More than 400 million individuals were affected by data breaches in 2022, due in part to retailer negligence.
• The bill’s mandates render existing cards inoperable.
• Both federal statistics and courts agree there is sufficient competitiveness in the current credit card marketplace.
• The bill is anti-free market, as it guarantees profits to favored card networks.
• The bill is an overreach that would put the government into consumers’ pockets that hold credit cards, forcing them to give up their preferred card network.
• The Durbin Amendment harmed credit unions and community banks and this would repeat those consequences.

CUNA, along with the American Bankers Association, Association of Military Banks of America, Bank Policy Institute, Consumer Bankers Association, Defense Credit Union Council, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Sized Bank Coalition of America, National Association of Federally-Insured Credit Unions, and National Bankers Association signed the letter.