Interchange bills would increase costs, decrease financial access

The Credit Card Competition Act would push more people away from access to financial products and services, wrote Resource One Credit Union President/CEO Mary Beth Spuck in The Dallas Morning News. CUNA, Leagues, and credit unions strongly oppose the bill, introduced by Sens. Roger Marshall, R-Kan., and Duck Durbin, D-Ill., in the Senate and Reps. Lance Gooden, R-Texas, and Peter Welch, D-Vt., in the House.

“Supporters of the bill claim that mandating a choice of networks will force down interchange fees and that merchants will share the savings with consumers,” she wrote. “That’s not going to happen. Look at previous efforts to muscle down interchange fees. More than a decade ago, Congress capped such fees for debit cards. The price control reduced the cost of accepting debit cards for merchants.

“But only 1.2% of merchants used the savings to lower prices, a study by the Federal Reserve Bank of Richmond showed. The rest kept prices the same or raised them, retaining the savings for themselves,” she added.

Spuck also said reducing the amount of money that supports the interchange system could have serious consequences for consumers.

“The biggest concern is fraud. Interchange fees help offset rising losses associated with fraud as well as the expense of fraud-detection systems. Attempts to steal private consumer data are skyrocketing. Fraud rates have doubled since 2011,” she wrote. “More than 300 million people were affected by data breaches in 2020. Those breaches are often of merchants’ systems, which aren’t subject to the same security standards as those of financial institutions.”

She said that Resource One, the only certified CDFI credit union in the Dallas Fort Worth area—reported nearly $500,000 in losses due to fraud in 2021. This bill would mean those costs get higher, and financial institutions would have to increase replacing cards, which costs around $3.99 per card.

“Our member-owners tend to be culturally diverse people of modest means. They depend on us for access to credit, including mortgages, at affordable rates; low- or no-cost checking and savings accounts; and counseling that can help them achieve financial well-being,” Spuck wrote. “The current interchange system makes offering those services financially viable. The Credit Card Competition Act, by contrast, could force us to raise interest rates, implement additional fees on credit cards, curb outreach efforts to underserved communities, or pull back on the extension of credit altogether.”