Caroline Melear, a Resident Fellow at the R Street Institute, expressed concerns about the Credit Card Competition Act, suggesting it would grant more authority to the Federal Reserve and limit consumer access to financial services.
“Congress should reject the Credit Card Competition Act, a bill that would cede more power to the federal reserve and reduce consumers access to financial products,” said Melear.
According to Congress.gov, the Credit Card Competition Act (S. 1838) seeks to enhance competition in the credit card market by mandating that major credit card issuers allow at least two unaffiliated networks on each card. This measure is intended to reduce merchant fees. However, opponents argue that it may inadvertently harm consumers by disrupting popular loyalty programs.
The Federal Reserve reported that in 2022, the average credit card interchange fee rate was 2.24% for all credit card transactions. These fees are paid by merchants to card-issuing banks and fund services such as fraud prevention, transaction processing, and customer rewards. Regulatory changes to these fees could reduce funding for these services, potentially affecting consumer access to credit card benefits and protections.
A 2023 Congressional Research Service report cited by the Electronic Payments Coalition found that interchange fee regulations can diminish consumer rewards and shift costs onto cardholders. Based on this analysis, the Coalition warned that the Credit Card Competition Act could significantly impact Virginia consumers by reducing access to credit card rewards and increasing fraud risks. These changes would affect millions of Virginians who rely on credit card benefits for travel, cash back, and everyday expenses.
Melear is a resident fellow at the R Street Institute with a focus on finance, insurance, and trade issues. Her work centers on evaluating free-market policy solutions to complex regulatory challenges. She has contributed analysis on topics such as financial regulation, payment systems, and economic competitiveness.
