Credit Competition Act Creeps Into 2023


The Durbin Amendment of 2010 regulated interchange fees for debit cards issued by banks with $10 billion or more in assets in the U.S. Mercator research covered the aftermath of this regulation, stating there are complexities. The alleged benefits of the regulation, including cost savings passed from merchants to consumers, have not panned out in the past 12 years. 

Though there is ongoing debate around the alleged benefits of 2010’s Durbin Amendment on debit cards, Senator Dick Durbin has continued to turn his head towards regulating credit cards next. The Credit Card Competition Act was first introduced in July 2022 and was positioned to follow the same regulation set forth in 2010. The regulation requires two unaffiliated networks to be supported by each payment card, thus supporting market competition and placing a spending cap on interchange paid by merchants to issuers.

It is important to note one of the major differences between credit and debit cards: rewards. Issuers utilize interchange revenue to afford paying out rich rewards to consumers. If interchange revenue paid to issuers is regulated and reduced, there is a very significant chance issuers would reduce or eliminate all credit card rewards. Consumers lose in the end.

Senator Dick Durbin claims that issuers receive more than enough revenue to cover credit card reward programs.

Proponents of the Credit Card Competition Act Have Grit

The Credit Card Competition Act’s proposal to the Senate last summer did not win legislative support. Following the same trend, the Credit Card Competition Act was introduced to the House of Representatives as a bill in September 2022 and did not win support. The Merchant Payments Coalition then attempted to run an ad campaign during the World Cup—which is largely sponsored by major card processing network Visa—to grab attention.

With another failed attempt of gaining support, supporters of the Credit Card Competition Act then hoped to attach the credit regulation to a major defense spending bill that needed to be passed in 2022. It is unclear what credit cards have in common with a National Defense Authorization Act. It comes off as a sneaky attempt to get support on the Credit Card Competition Act by attaching it as an amendment to a completely unrelated Act that is posed to be approved. It is a stretch, but Senator Durbin stated sometimes veterans have to pay a surcharge at military commissaries for card payments. The U.S. Defense and Treasury were called to issue a report on just how much veterans are paying in credit card surcharges. The attempt to attach the Credit Card Competition Act to the National Defense Authorization Act was not successful.

According to Yahoo Finance, congress voted on the Credit Card Competition Act last month in a last-minute attempt to get it passed in 2022. Another failure to gain support coupled with the grit of Senator Dick Durbin promises the Credit Card Competition Act will continue to be pushed this year.

Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Mercator Advisory Group.


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