Interchange bill ‘cynical manipulation’ of payments system

CUNA and organizations representing the entire financial services industry wrote House leaders in strong opposition of the interchange bill (H.R. 3881) introduced last week by Reps. Lance Gooden, R-Texas, and Zoe Lofgren, C-Calif. The letter follows a similar one sent by the organizations to Senate leaders last week.

CUNA and Leagues issued an action alert in opposition to the bill, which has generated more than 9,000 messages of opposition.

“Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and benefit big box retailers by reducing the number of credit card issuers competing for consumers’ business, removing a consumer’s choice of preferred card network, wringing out the competitive  differences among card products, limiting popular credit card rewards programs, and putting the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board,” the letter reads.

“The Gooden-Lofgren bill accomplishes this by using legislation to circumvent the free market to award private-sector contracts to a small handful of the sponsors’ favored payment networks to pad the profits of the largest e-commerce and multi-national retailers who are raising prices on American families far more than the real rate of inflation,” it adds.

The letter also notes:

• Interchange is the cost retailers pay to their financial institution or card processor in return for many benefits that come with card acceptance, including higher sales, a larger customer base, reduced cash-handling risks, reduced bounced checks, and guaranteed payment.
• The dual routing technology in the bill does not exist today because of the nature of a credit transaction as an extension of unsecured credit to consumers. Credit cards are very different than debit cards and should not be regulated as such.
• The legislation would hand control of the nation’s credit card system to breach-prone merchants. More than 400 million individuals were affected by data breaches in 2022, due in part to retailer negligence.
• The bill’s mandates render existing cards inoperable.
• Both federal statistics and courts agree there is sufficient competitiveness in the current credit card marketplace.
• The bill is anti-free market, as it guarantees profits to favored card networks.
• The bill is an overreach that would put the government into consumers’ pockets that hold credit cards, forcing them to give up their preferred card network.
• The Durbin Amendment harmed credit unions and community banks and this would repeat those consequences.

CUNA, along with the American Bankers Association, Association of Military Banks of America, Bank Policy Institute, Consumer Bankers Association, Defense Credit Union Council, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Sized Bank Coalition of America, National Association of Federally-Insured Credit Unions, and National Bankers Association signed the letter.