Old Dominion News

The Electronic Payments Coalition (EPC) said this week that it "applauds Congress" for ending the 118th Congress' legislative session without passing the "Credit Card Competition Act of 2023" (CCCA), a bill that is opposed by the Virginia Bankers Association (VBA).

"EPC applauds Congress for repudiating the experimental, draconian Durbin-Marshall Credit Card Bill—a proposal that would undermine the security, rewards, and convenience of Americans’ credit cards," said Richard Hunt, executive chairman of EPC, in a statement. "This reckless legislation sought to impose a government takeover of credit cards, allowing corporate mega-stores to pocket larger profits at the expense of data security and fraud protections.

The EPC is a trade association that represents credit unions, community banks, and payment card networks. The coalition advocates for policies that protect and promote the use of electronic payments. 

Originally sponsored by U.S. Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kans.), the CCCA, or 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. Opponents to the bill argue that if given the choice, retailers would likely choose cheaper, less secure networks for processing transactions, thereby exposing consumers to increased securities and fraud risks.  

“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 in May 2024. “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 in May by the EPC which found that, since 2020, the ownership of rewards cards has grown fastest among low-to-moderate-income individuals.

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. 

Glenn Grossman, the Director of Research at financial advisory firm Cornerstone Advisors, told Federal Newswire earlier this year that the bill could also lead to increased credit card fraud risk. 

“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 added that Visa has invested billions on fraud detection.

“The investment builds trust and in return consumers use their credit cards,” said Grossman. "Zero liability means something to consumers. With the CCCA, it is possible that promise is gone."

In a report released in July 2023, “The True Impact of Interchange Regulation: How Government Price Controls Increase Consumer Costs and Reduce Security,” Grossman wrote that studies show 79% of consumers choose credit cards as a payment option because of their data security.

Grossman said that, under the legislation, credit card authorizations would be allowed to flow across many “pipes” which would eliminate much of the “fraud fighting value that Visa and MasterCard have implemented.”

The bill would not require new networks to provide fraud detection, Grossman explained.

“It is expected these new networks would rather just route data, not ensure the authorization is legitimate. It is a fraudster’s dream come true!” he said.