With Republicans’ recent sweep of the White House, Senate, and House, it is perhaps unsurprising that some lawmakers are using the year’s final weeks to push legislation that is unlikely to gain traction in Congress next year. This certainly appears to be the case for soon-to-be-replaced Senate Judiciary Committee Chairman Dick Durbin, who has used his last month in power to promote highly controversial, and very misguided, regulations in his Credit Card Competition Act (CCCA).
Late last month, the senior Illinois senator spearheaded a surprise Senate Judiciary Committee hearing on the credit card industry. During the hearing, Durbin and his senate allies hammered Visa and Mastercard for their market dominance and for allegedly charging merchants excessive fees on credit card transactions. They argue these fees—known as interchange fees or swipe fees—are harmful to merchants and are a hidden contributor to the high prices squeezing consumers. In their mind, the solution to this problem is for Congress to pass the CCCA, legislation first introduced in 2022 and reintroduced last year. That would be a mistake.
The CCCA is designed to increase market competition by requiring large card-issuing banks to provide merchants with at least one credit card network to choose from other than Visa or Mastercard when processing credit card transactions. Supporters hope that such a requirement will reduce credit card interchange fees if more cost-effective networks exist, and that merchants will pass the resulting cost savings on to consumers. The problem with this reasoning is that it is predicated on the false assumption that the credit card market is broken and requires correction.
However, the credit card market is not broken. While Visa and Mastercard indeed have a large presence in the credit card market, they also face plenty of competition. Since many consumers still rely on more than one purchase method when completing transactions, Visa and Mastercard must also compete with cash, check, and debit cards. Not to mention online competition from companies like PayPal and Venmo that allow consumers to bypass traditional payment networks entirely by making payments directly.
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Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.