WASHINGTON–There is some speculation in Washington that the credit union-opposed Credit Card Competition Act will debut in Congress this week, according to one person.

That legislation, backed by Sen. Dick Durbin (D-IL) has been introduced in several prior sessions of Congress and has ultimately not passed a vote, but just as strongly as financial institutions oppose it, the country’s retailers and business groups support it, so it continues to appear. 

It also has support from progressive Democrats and populist Republicans, according to the Defense CU Council (DCUC), which joined with a coalition of other financial services organizations in sending a letter to the Hill on Monday in opposition to the bill.

Proponents of the Credit Card Competition Act (CCCA) say it will increase competition in the credit card industry by requiring large banks (with assets over $100 billion) to allow credit card transactions to be processed on at least two unaffiliated networks, one of which must not be Visa or Mastercard. While only one credit union (Navy Federal) is above that asset size threshold, critics say it will for all practical purposes apply to all card issuers and will drive down interchange income without requiring retailers to do anything about risks from fraud.

‘United Opposition’

“We’re going to partner with all of our trade associations in the financial services industry to make sure members of Congress know that there’s united opposition to this bill,” said Jason Stverak, chief advocacy officer with the DCUC.

He said DCUC will place particular emphasis in its messaging on how the legislation will be harmful to members of the military and their families, including creating reluctance to issue cards to those with lower credit scores.

Fate in Current Congress?

But given the strong support/opposition for the legislation from both sides, will its fate be any different than that in prior sessions of Congress?

According to Stverak, “multiple issues” will factor into the Credit Card Competition Act’s ultimate future, including the fact Durbin has said he will not be running for reelection, “so he may not be putting his full weight into it,” said Stverak, agreeing the bill has become something of a “Groundhog’s Day”-like presence in Congress.

Also potentially breathing some new life into the CCCA is a bipartisan bill introduced in February by Sen. Bernie Sanders (D-VT) and Sen. Josh Hawley (R-MO) that seeks to cap credit card interest rates at 10%. A cap on card interest rates has also gotten support from President Trump, noted Stverak. 

Letter Sent

In response to all of that, the Defense Credit Union Council has joined with nine financial trade organizations in sending a letter to the Hill expressing opposition to the CCCA.

In the letter, the organizations state “any legislative initiatives to expand the power of the federal government to intervene in the U.S. credit card market “poses harm to consumers, small businesses, and financial institutions by reducing choices, increasing costs, and raising fraud risks.”

In addition to DCUC, other organizations signing the letter include the American Bankers Association, America’s Credit Unions, the Association of Military Banks of America, Bank Policy Institute, Consumer Bankers Association, Independent Community Bankers of America, Electronic Payments Coalition, Mid-Size Bank Coalition of America, and the National Bankers Association.

Key Concerns

The organizations said their key concerns include:

• Impact on Small Businesses: “A University of Miami study found the bill would mainly benefit large retailers, leaving small businesses at a disadvantage, reducing access to $700 billion in credit, and eliminating $1 billion in rewards,” the letter states.

• Harm to Community Banks & Credit Unions: “These institutions play a critical role in local economies, but price controls on interchange fees would weaken their ability to lend and invest in security.”

• Consumer Risks: “The bill could reduce access to credit for low-income consumers, diminish rewards programs, and fail to pass savings on to consumers. Studies show that 88% of consumers value credit card rewards, and most would be disappointed to lose them,” according to the letter.

• Existing Market Competition: “The U.S. credit card market is already competitive, with various payment options available. Research shows financial institutions often operate at a loss on credit card transactions due to the costs of rewards programs.”

“The payment card system is convenient, secure, and hassle-free. It protects consumers against fraud, guarantees businesses receive timely payments, funds reward programs like cash back, and powers the American economy, from brick-and-mortar establishments to innovative e-commerce platforms 24 hours a day, seven days a week, 365 days a year. The Durbin-Marshall bill, and any other legislation that intervenes in the credit card market, puts all that in jeopardy,” the letter reads.

‘A Misnomer’

“The Credit Card Competition Act is a misnomer—it does nothing to enhance competition and everything to consolidate power in the hands of the largest retailers at the expense of consumers, small businesses, and community financial institutions,” DCUC President/CEO Anthony Hernandez said in a statement. “If Congress enacts this legislation, consumers will lose rewards programs they depend on, small businesses will face greater financial strain, and community banks and credit unions will struggle to provide essential services. This is a solution in search of a problem—one that will only create new ones.”

This Week in D.C.

Also on tap this week in Washington:

• Today, the Huse Financial Services Committee will hold a hearing on expanding access to capital
• On Wednesday, before a House Financial Services Subcommittee on Financial Institutions hearing  focusing on CFPB reform, Ana Fonseca, president/CEO of Logix Federal Credit Union, will testify and voice credit unions’ priorities for updates to the bureau.
• On Thursday, the Senate Banking Committee holds a nomination hearing with nominees to the Treasury, SEC, and OCC