Pub. 13 2023-2024 Issue 2

Message From the CEO: Unmasking the Unintended Consequence — The Marshall-Durbin and Gooden-Welch Price Control Bills

In an ongoing legislative battle, CBA, along with ABA and other state bankers associations, continues to oppose the introduction of the “Credit Card Competition Act” or any other legislation that would impose broad network routing requirements on credit cards and price control. In the intricate world of legislative agendas, it’s common for bills to carry hidden negative consequences. While the Marshall-Durbin Senate bill and the Gooden-Welch House bill are purported as a step toward fairness and consumer protection, the evidence suggests otherwise.

An attempt to standardize card products across payment networks and restrict interchange fees has the potential to harm smaller institutions by favoring larger credit card companies with the resources to adapt to new regulatory requirements. It will reduce differentiation and competition among credit card issuers, undermining the principles of free market competition and limiting consumer choice while increasing consumer costs and eroding card benefits and rewards programs. In the U.S. economy, price should be established by the market.

Our credit card processing system is the most efficient in the world, securely moving millions of dollars a second with 99.999% reliability. It also provides protections like zero-dollar fraud liability for consumers and guaranteed payments for retailers. This infrastructure is complicated and expensive, and credit card interchange is a major source of how it is financed. There are over 5,000 credit card issuers marketing directly to consumers, demonstrating there is already plenty of competition, as confirmed by metrics used by the FTC and DOJ.

The role of banks extends beyond processing transactions; they bear the weight of protecting their customers from fraud, data breaches and inefficient systems. Allowing financial institutions to choose the networks aligns with their role as trusted guardians of their customers’ financial well-being.

And while proponents claim that small businesses will benefit from the Marshall-Durbin and Gooden-Welch bills, history tells a different tale. The Durbin Amendment, which bears similarities to this legislation, failed to deliver the expected outcomes. Instead, small banks saw a significant portion of their debit card revenue vanishing after its implementation. The one-size-fits-all regulations it imposed also hurt small retailers who saw little to no benefit and, in some cases, even paid more to accept cards. The Marshall-Durbin and Gooden-Welch bills seem to echo this pattern, raising concerns that history might repeat itself with devastating consequences for those it claims to protect.

It’s our duty to ensure that legislative measures genuinely serve the interests of all and expose hidden hazards that could undermine the fabric of fairness and competitiveness.

Picture of By the Colorado Bankers Association

By the Colorado Bankers Association