The Credit Card Competition Act, introduced in 2022 and reintroduced in 2023, aims to reshape the landscape of credit card transactions in the United States. Despite bipartisan support and high-profile endorsements, the bill remains stalled as the 119th Congress approaches its start in January. This blog post delves into the key points surrounding the act, the implications of its potential passage, and the ongoing debate among lawmakers, industry stakeholders, and consumers.
Understanding the Credit Card Competition Act
At its core, the Credit Card Competition Act (Senate Bill 1838) seeks to mandate that banks offering credit cards provide merchants with a choice of at least two networks for processing electronic transactions. This initiative aims to break the duopoly currently held by Visa and Mastercard, which dominate the credit card market. Proponents argue that increased competition would lead to lower transaction fees for merchants, which could ultimately benefit consumers through reduced prices.
The act was introduced by Senators Roger Marshall (R-Kan.) and Richard Durbin (D-Ill.), who have garnered support from various quarters, including Vice President-elect J.D. Vance and even President-elect Donald Trump. However, despite this momentum, the bill has faced significant hurdles, remaining largely inactive throughout 2023 and into 2024.
The Senate Judiciary Committee Hearing
The Senate Judiciary Committee recently held its final hearing on the Credit Card Competition Act for the year, where members expressed skepticism about the bill’s viability. Senator Thom Tillis (R-N.C.) voiced his belief that the legislation would not pass, suggesting it could create more problems than it solves. He urged Visa and Mastercard to modify their practices voluntarily, indicating a preference for industry self-regulation over congressional intervention.
Senator Josh Hawley (R-Mo.) echoed these sentiments, asserting that the current proposal is not a sustainable solution. He proposed an alternative approach, advocating for capping interest rates on credit cards to alleviate the burden of the $1.14 trillion debt carried by American consumers. This alternative, however, faces similar opposition from the credit card industry as the original bill.
The Stakes for Consumers and Businesses
The implications of the Credit Card Competition Act extend beyond the immediate financial landscape. Critics, including Airlines for America, warn that the bill could jeopardize loyalty programs associated with cobranded credit cards. These programs are vital for many consumers who rely on rewards for travel and other purchases. The trade group has launched an anti-legislation campaign, “Protect Our Points,” highlighting the potential negative impact on consumer benefits.
The Electronic Payments Coalition, representing various stakeholders in the payment processing industry, has also criticized the bill. They argue that the legislation is unlikely to lower prices for consumers or help small businesses, citing a Congressional Research Service report that lacks evidence supporting the bill’s claims. The report suggests that credit card routing mandates may not yield the anticipated savings.
Historical Context: The Durbin Amendment
The debate surrounding the Credit Card Competition Act is reminiscent of the discussions that followed the implementation of the Durbin Amendment in 2010. This amendment established a fixed fee for debit card transactions, which critics argue led to the erosion of rewards programs for debit card users. The fear is that a similar outcome could occur with credit cards if the current bill passes, potentially diminishing the value of loyalty programs and increasing costs for consumers.
Senator Durbin himself acknowledged the concerns of the airline industry, noting that many airlines derive significant revenue from credit card partnerships and frequent flyer programs. If these programs were to falter, airlines might respond by raising ticket prices, ultimately affecting travelers.
The Broader Implications for the Credit Card Industry
The Credit Card Competition Act has sparked a broader conversation about the role of credit card companies in the American economy. Proponents argue that the legislation is necessary to foster competition and reduce fees that burden small businesses. Senator Peter Welch (D-Vt.) emphasized during the hearing that Visa and Mastercard fees are detrimental to small businesses, which rely on these networks for payment processing.
In contrast, industry representatives warn that the bill could lead to increased fraud, hamper rewards programs, and limit credit availability for consumers and small businesses. Bill Sheedy, a senior adviser at Visa, pointed to the European Union’s experience with capped interchange fees, which resulted in diminished loyalty programs and higher costs for consumers.
The Future of the Credit Card Competition Act
As of now, the Credit Card Competition Act has not progressed beyond committee discussions, and its future remains uncertain. Senators and industry stakeholders continue to debate the merits and drawbacks of the proposed legislation. While some lawmakers express a desire for reform, others caution against hasty action that could have unintended consequences.
Senator Durbin, who is up for reelection in 2026, has not confirmed his plans for the future, but he remains committed to addressing the issues surrounding credit card fees and competition. The bipartisan support for the bill suggests that it may continue to be a relevant topic in future congressional sessions, regardless of individual lawmakers’ political futures.
Final Thoughts
The Credit Card Competition Act represents a significant attempt to reform the credit card industry and promote competition. However, the ongoing debate highlights the complexities of the issue, with valid concerns raised by both proponents and critics. As Congress reconvenes, the fate of the bill remains uncertain, but its implications for consumers, businesses, and the credit card industry will continue to resonate in discussions about financial reform.
In the meantime, consumers and businesses alike should stay informed about the developments surrounding this legislation, as its potential passage could reshape the landscape of credit card transactions and rewards programs in the United States.
