WASHINGTON – A fight over credit card transaction fees is resurfacing on Capitol Hill, as Senator Roger Marshall has proposed an amendment to a housing bill that would enact provisions from the Credit Card Competition Act. The move comes as more than 6,000 credit union advocates are in Washington D.C. This week, urging lawmakers to oppose what they see as government overreach into the payments system.
The proposed amendment to the Housing for the 21st Century Act would require credit card networks to allow transactions to be routed over the network with the lowest cost, a practice proponents say would increase competition and lower costs for merchants – and potentially consumers. However, credit union groups argue the mandate would disrupt a secure system, increase fraud risk, and ultimately harm consumers and smaller financial institutions.
“While we support the Housing for the 21st Century Act, attaching the Credit Card Competition Act to a housing bill would do nothing to address the housing affordability challenges facing working families, nor would it change the underlying facts,” stated Scott Simpson, president and CEO of America’s Credit Unions. “And it would do nothing to protect the American consumer. This proposal would still disrupt a secure and well-functioning credit card system in ways that hurt consumers and small financial institutions, including increased fraud risk, weakened consumer protections, and limited access to affordable credit for millions of credit union members. Lawmakers should reject any amendments related to credit card mandates.”
Concerns Over Security and Competition
The debate centers around the idea of “routing,” which determines which network processes a credit card transaction. Currently, card networks like Visa and Mastercard largely control this process. The Credit Card Competition Act aims to give merchants more choice, allowing them to route transactions over networks that offer lower fees. Supporters, primarily large retailers, contend this would save businesses money, which could be passed on to consumers.
Opponents, like the Defense Credit Union Council (DCUC), argue that forcing transactions onto the cheapest network, rather than the most secure, could have serious consequences. Jason Stverak, Chief Advocacy Officer for the DCUC, explained that the proposal could increase fraud risk, threaten credit card rewards programs, and reduce access to credit for military households. According to the Competitive Enterprise Institute, the legislation primarily benefits big retail at the expense of customers.
“For defense credit unions that serve servicemembers, veterans, and their families, this policy could have serious unintended consequences,” Stverak said. “The Durbin-Marshall proposal would effectively force transactions onto the cheapest network rather than the most secure one.”
A Familiar Playbook?
The DCUC points to previous government intervention in the debit card market as a cautionary tale. Stverak argues that the previous mandates did not deliver the promised savings to consumers and instead led to fewer benefits and higher costs for many households. America’s Credit Unions echoed this sentiment on LinkedIn, emphasizing the potential for negative consequences.
The Housing Bill Connection
The decision to attach the Credit Card Competition Act to the Housing for the 21st Century Act has drawn criticism from those who believe the two issues are unrelated. Opponents argue that using a housing bill as a vehicle for payment system changes is inappropriate and distracts from the primary goal of addressing housing affordability. Simpson stated that the amendment “would do nothing to address the housing affordability challenges facing working families.”
What’s Next?
The Senate is expected to continue debate on the Housing for the 21st Century Act, and Senator Marshall’s amendment is likely to face a vote. The outcome remains uncertain, but the strong opposition from credit unions and the DCUC suggests a close contest. The debate highlights the ongoing tension between promoting competition in the financial sector and ensuring the security and stability of the payments system. Lawmakers will need to weigh these competing interests as they consider the future of credit card routing.
Consumers interested in learning more about the Credit Card Competition Act and its potential impact can follow updates from America’s Credit Unions and the Defense Credit Union Council.
