Credit Card Competition Act of 2023 Likely to be Delayed

Background

On June 7th, 2023, US Representatives Zoe Lofgren (D-CA) and Lance Gooden (R-TX), along with US Senators Dick Durbin (D-IL), Roger Marshall, M.D. (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH), introduced the Credit Card Competition Act of 2023.

The bill is similar to the Credit Card Competition Act of 2022, which was introduced in the Senate by Senators Durbin and Welch and in the House by Representatives Welch and Gooden. Last year neither the Senate nor the House bill had significant legislative support and neither bill received a committee hearing or a vote.

The CCCA of 2023 seeks to drive down merchant fees by increasing competition among US credit card networks, weakening Visa’s and Mastercard’s market dominance. It directs the Federal Reserve to issue regulations covering issuing banks with over $100 billion in assets. Under the proposed regulations, these banks will not be allowed to restrict the number of networks on which an electronic credit transaction may be processed to less than two unaffiliated networks, at least one of which cannot be one of the two largest networks. Merchants will have the right to choose the network through which their payments are processed.

Opponents of the bill assert that it will impose new costs on consumers and community banks, pose security risks and end credit card rewards programs. One of their key arguments is that retailers will not pass the proceeds of any fee reduction on to consumers. As evidence, they point to a 2014 study by the Federal Reserve Bank of Richmond which found that in response to the 2011 Durbin Amendment that capped interchange fees on debit cards, only 2% of merchants lowered their prices while 23% increased them.