A recently published opinion/editorial co-authored article in Northern Nevada Business Weekly (NNBW) spotlights Nevada Credit Union League President and CEO Diana Dykstra and Nevada Bankers Association (NBA) President and CEO Phyllis Gurgevich, entitled “The Credit Card Competition Act Isn’t Really Helping Consumers”.
The Credit Card Competition Act (CCCA) requires financial institutions with $100 billion or more in assets to offer at least two credit card networks for transactions to be routed on. The merchant would choose the network to process the transaction.
The Leagues and credit unions believe the CCCA will cost consumers money — and their data privacy. Retailers won’t pass the savings to consumers.
Additionally, the CCCA creates space in the marketplace for weak cybersecurity networks, leaving consumer data vulnerable to fraudsters. The CCCA lacks merchant data protection requirements. This gives merchants the option to choose low-cost credit card payment networks over reliable systems.
Lastly, the CCCA’s current asset exemption won’t protect credit unions. Although there’s an exemption for financial institutions with $100 billion or less in assets, smaller institutions will be impacted (as experienced with debit interchange fee regulations coming out of 2011).
The following is the co-authored piece in the NNBW by Dykstra and Gurgevich:
In 2010, U.S. Sen. Richard Durbin introduced an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act that implemented interchange fee caps and routing mandates to debit cards transactions. These actions have proven to be harmful to consumers.
Durbin’s 2010 amendment for debit cards gave massive benefits to mega retail chains at the expense of millions of everyday Americans. Retailers like Walmart and Amazon raked in over $100 billion in extra profits, and never lowered prices for customers. In fact, the Richmond Federal Reserve revealed that 98 percent of retailers either raised their prices or kept them the same following the passage of the amendment.
The provision also had severe impacts on customers of community banks and credit unions. By the fourth quarter of the year of enactment, free checking accounts offered by financial institutions, which were supported by debit interchange, dropped by 40 percentage points.
More than 5,100 banks, community banks and credit unions closed or merged since the implementation, resulting in less consumer choice. Fallout from the 2010 debit card amendment made it very clear: only massive retailers, like Walmart and Amazon, benefit from routing mandates. Now, Durbin has teamed up with Sen. Roger Marshall to do it again with the introduction of the so-called Credit Card Competition Act.
The CCCA would place a government routing mandate on credit cards, implementing an even more restrictive policy and worsen the problems experienced for the past 10 years. This means that financial institutions would have to reissue credit cards and be forced to accept and allow access to additional, unaffiliated networks rather than just the networks they know and trust.
And, it means rewards, cash-back, and other benefit programs funded through interchange will either be significantly reduced or eliminated. All while introducing new security and privacy concerns.
Cash is expensive to handle and is less convenient and secure than a card transaction so retailers like the dependability, reliability and ease of credit cards. But retailers, particularly large retailers, have been unwilling to invest in the service, security and benefits of accepting card payments. Now, they want control over how financial data is processed without any protections for consumers.
A few years ago, hackers stole data from up to 40 million credit and debit cards by accessing Target’s gateway server through a third-party vendor. We saw a similar scenario happen with Home Depot, after which Connecticut attorney general William Tong said that Home Depot “failed to take those precautions,” to ensure sensitive customer data is protected.
Approximately 92 percent of consumers say keeping their private information safe from data breaches is a priority. Gutting the interchange system with a race to the bottom payment network would worsen these problems while also transferring billions of dollars a year from consumers to the largest retailers in the world, Amazon, Walmart and Target to name a few.
In total, the CCCA would transfer $40 to $50 billion a year away from ordinary Americans and into the pockets of big box stores while kicking 10 to 15 million people out of the credit system.
Equally troubling is if this legislation is enacted, loans and credit would be less accessible to small business owners who are struggling or just starting out. The bill would reduce revenue that community banks and credit unions use to extend loan access for underserved communities, forcing them to charge higher rates and raise credit standards.
Nevada would bear some of the highest burdens of this ill-conceived legislation. Credit card reward programs help more than 800,000 people travel to Nevada each year, injecting an additional $1.2 billion in annual economic activity in our communities and creating nearly 9,000 additional jobs. This would all be at risk if the Credit Card Competition Act passes.
That is why a diverse group of community leaders, unions, elected officials and credit unions and banks have been sharing how harmful the Credit Card Competition Act would be for Nevadans.
The Credit Card Competition Act doubles down on a failed policy – and if it passes, we will all pay the price.
