Banking Groups Warn Congress the CCCA Would Harm Consumers

The American Bankers Association and 52 state bankers association came out strongly against the Credit Card Competition Act. In a joint press release, they said the CCCA would reduce card choice, increase fraud risks, and reduce credit card rewards.

The act would also increase the cost of offering credit to borrowers and cause economic challenges for smaller banks and financial institutions, they said. The bill, which aims to promote competition, would benefit large retailers rather than customers, small businesses or community financial institutions, according to the ABA.

The press release also states that minority and lower income consumers would be negatively impacted by the bill due to changes in credit access and in a decline in credit card reward programs. 

Ten other banking groups and credit union groups also sent letters to Congress opposing the CCCA including America’s Credit Unions, Consumer Bankers Association, Independent Community Bankers Association, and National Bankers Association.

The associations warned that small banks and credit unions would be harmed if the CCCA passes.

CCCA Bill Reintroduced on Jan. 13

U.S. Senate Democratic Whip Dick Durbin (D-IL) and U.S. Sen. Roger Marshall (R-KS) reintroduced the Credit Card Competition Act with the aim of increasing competition in the credit card market and putting an end to the Visa-Mastercard duopoly they say is squeezing small businesses. President Trump endorses the bill. 

“Americans are struggling with everyday purchases like groceries and gas, and credit card swipe fees inflate those already exorbitant prices,” Durbin said.

“By bringing real competition to credit card networks, which is currently dominated by the Visa-Mastercard duopoly, we can reduce swipe fees and hold down costs for Main Street merchants and their customers,” he added.

Marshall took a swipe at big banks in his endorsement of the CCCA. 

“The average American family is being ripped off by Big Banks, who profit billions from swipe fees while hardworking Americans pay the price. It’s time to bring real competition to a credit card network market dominated by Visa and Mastercard and drive down the cost of everyday goods,” Marshall said. 

Research Shows CCCA Would Hurt Community Lending

By mandating that credit card issuers and banks use more than one payment network, the CCCA would distort the market and hurt small community banks, according to a research paper by University of Miami finance professor Indraneel Chakraborty.

This mandate would give the largest merchants much greater bargaining power when negotiating interchange fees at the expense of community banks. Without the market power, these community banks would lose money on each transaction and jeopardize credit access to the communities they serve, according to Chakraborty.

Community banks provide credit to subprime customers, and these customers would have less access to credit if a community bank becomes a less viable lender.

The Bottom Line

The ABA and 52 state bankers associations came out swinging in their opposition to the CCCA. They say the bill would increase customer fraud risks, reduce credit card rewards, and bump up the costs of offering credit to consumers.

They also say the bill would cause challenges for small banks and other financial institutions and hurt minority and low-income consumers.