Boulder Leader

The policy director at Colorado’s Common Sense Institute (CSI) said proposed credit card regulations in Congress would result in higher prices and fewer credit card rewards for consumers.

“A handful of U.S. senators recently introduced a bill that would gut credit card rewards programs — eliminating many of the perks that Americans use to book flights, save on their grocery bills, or just put some extra money in their pockets,” wrote DJ Summers, director of policy and research at CSI, in an op-ed in The Daily Camera. “Lawmakers claim the proposed legislation — called the Credit Card Competition Act of 2023 — would make it cheaper for store owners to process credit card transactions, leading to lower prices for consumers.”

“But their plan won’t work. Retailers pocket that extra dough,” wrote Summers. “More than a decade ago, Congress passed similar legislation for debit cards. The result? Higher consumer prices, fewer rewards programs and bigger profits for big-box retailers.”

Founded in 2010, CSI is a nonpartisan research organization that focuses on economic issues and public policy in Colorado.

S. 1838, the "Credit Card Competition Act of 2023," originally sponsored by U.S. Sen. Dick Durbin (D-Ill.), would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. 

The bill is opposed by the Colorado Bankers Association (CBA).

“In addition to an increased potential of fraud, the bill, if enacted, may jeopardize credit card reward programs,” CBA’s President and CEO, Jenifer Waller, told Centennial State News.

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 Centennial State 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. 

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. 

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