Old Dominion News

A spokesperson for the Virginia Bankers Association (VBA) said her organization is opposed to proposed credit card regulations pending in the U.S. Senate.

The “Credit Card Competition Act”, S. 1838, would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. 

“If passed, this legislation will likely mean the elimination or severe restrictions on credit card rewards programs going forward – something many millions of Americans count on and benefit from, especially working class consumers.” Chandler Owdom, VBA’s senior vice president of communications and strategy told Old Dominion News. “Despite the rhetoric from supporters of the bill, this provision will negatively impact banks of all sizes, including community banks as we saw with interchange caps on debit cards.”

Owdom referenced a report released last week by the Electronic Payments Coalition which found that, since 2020, the ownership of rewards cards has grown fastest among low-to-moderate-income individuals.

Glenn Grossman, the director of research at financial advisory firm Cornerstone Advisors, said S. 1838 could also lead to an increase in credit card fraud, reported Old Dominion News on April 25.

“If the CCCA were to be approved the routing of credit card transactions would move from a ‘single pipe’ to ‘multiple pipes’ of data flowing from merchants to issuers,” said Grossman. “Today, card issuers depend on the networks to profile and identify fraud.”

“They see all the transactions on their network and have developed fraud detection capabilities that would not be possible in a fragmented structure the CCCA would create,” Grossman said. 

Owdom said her organization concurs that the bill could have a negative impact on credit card security.

The bill applies to credit cards what a similar measure in 2010, often referred to as the “Durbin Amendment,” applied to debit cards. The 2010 measure was a requirement of the “Dodd–Frank Wall Street Reform and Consumer Protection Act.” 

A 2014 George Mason University study found that the 2010 “Durbin Amendment” led to a 50% reduction in the number of “fee-free” accounts offered by banks between 2009 and 2013, and doubled average monthly fees on “non-free” current bank accounts. 

The study also said the measure resulted in an increase of 1 million "unbanked" Americans in the year after the measure was enacted. 

Owdom said her organization appreciates Sen. Mark Warner’s (D-Va) opposition to that previous “Durbin Amendment” and that the VBA has had conversations with both of Virginia’s U.S. Senators about S. 1838.

The bill is currently pending in the U.S. Senate Committee on Banking, Housing, and Urban Affairs.