The following content is sponsored by the Electronic Payments Coalition.
Sen. Dick Durbin (D-IL) loves to legislate, and his latest target is your wallet. His proposed Credit Card Competition Act of 2023 is over a thousand words long and will severely upend how payments and credit card rewards programs work. In fact, if he has his way, rewards programs would entirely disappear.
He’s done it before to debit cards.
Now he’d like your credit card points too.
Under the proposed legislation, retailers will have the power to ignore a customer’s choice and instead route credit card payments through the network of their own choosing, meaning they could choose the most unsafe, cheapest network.
Unfortunately, customers like you will lose out on essential credit card benefits as a result, and these mega-stores would get a massive payday. All the while compromising your financial information on cheap, foreign networks.
We know exactly what to expect with the Credit Card Competition Act because it mirrors the harmful consequences of the 2010 Durbin Amendment. The Durbin Amendment gave the government greater control over private payments, allowing the Fed to further control debit card routing rules. Retailers promised these new price controls and routing rules would result in increased savings for consumers and small businesses.
As you may have guessed, the exact opposite happened, and ever since 2010, the Durbin Amendment has negatively impacted consumers, small businesses, and community banks in order to profit big-box retailers. As a matter of fact, since 2011, retailers have pocketed more than $145 billion in Durbin Amendment profits, and consumers have continued to suffer.
One of the major losses consumers faced under the Durbin Amendment was rewards programs. Giving the government the power to set prices and control debit card routing caused these programs to completely dry up. Banks and credit unions could no longer afford to fund rewards. According to a study from the Mercatus Center, nearly three-quarters of small financial institutions said Durbin had a negative effect on their earnings. This directly caused the disappearance of debit rewards.
Other benefits went away too, like free checking. In fact, the number of free checking accounts was cut almost in half in the two years after Durbin was passed. Lower-income consumers were particularly effect, and have lost $1-3 billion a year due to a reduction in free checking accounts, loss of debit rewards programs, and higher retailer prices.
The Credit Card Competition Act would do the same thing to banks and credit unions again—destroying a key source of income that helps fund small business loans, credit card rewards, fraud prevention programs, and more.
What you’ll probably notice first is the ending of rewards programs. Groceries, gas, and travel are only a few of the many credit card rewards programs that would die under this legislation. Already, travel rewards experts like The Points Guy are warning people that their perks may soon disappear.
But there is something you can do to stop this. The bill isn’t law yet, and there is time to make sure your voice is heard.