Washington, D.C.—A coalition of free-market organizations has issued a joint letter urging Congress to oppose the reintroduction of the Credit Card Competition Act and other efforts to impose price controls on credit cards. The coalition warns that these measures would distort the financial market, restrict consumer access to credit, and ultimately fail to deliver promised cost savings to the public.
“Price controls on credit card interchange fees and interest rates may sound consumer-friendly, but they ultimately reduce competition, limit access to credit, and benefit special interests at the expense of everyday Americans,” the letter states.
Key Takeaways:
- Market Distortion and Consumer Harm:
- The Credit Card Competition Act acts as a backdoor price control, disrupting the market and making it harder for banks and credit unions to assess risk and extend credit.
- Similar regulations under the Durbin Amendment resulted in higher fees and fewer free banking services for consumers.
- Increased Barriers to Credit Access:
- Proposed interest rate caps, such as Senator Bernie Sanders’ call for a 10% limit, would restrict lending, disproportionately affecting lower-income consumers who rely on short-term credit for essentials.
- Data from the Federal Reserve shows that 22% of Americans are unbanked or underbanked, and reducing credit availability would only exacerbate this issue.
- Failure to Deliver Consumer Savings:
- There is no evidence that savings from regulated interchange fees would be passed down to consumers.
- Government studies show that prior price controls on financial services led to reduced competition and higher costs for everyday banking products.
The coalition urges Congress to reject government-imposed price controls on credit cards, including the Credit Card Competition Act and proposed interest rate caps. Lawmakers should focus on market-driven solutions that enhance competition and consumer choice without restricting access to credit.
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