Dear Member of Congress: 

We, the undersigned organizations, oppose the inaccurately named Credit Card Competition Act of 2022 (S. 4674). The bill is a backdoor  price control, and extension and expansion of the Durbin amendment as  enacted in the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203).  

As written, the bill directs the Federal Reserve to draft rules requiring credit cards issued in the United States to offer at least two unaffiliated  payment network options for point-of-sale and online transactions.  

According to the bill, the two networks may not both be Visa and  Mastercard, because they “hold the 2 largest market shares with respect  to the number of credit cards issued in the United States.” However,  should market share switch hands to new firms, the routing mandates  will no longer apply. The bill also mandates that the proprietary security of the credit cards function so that all networks are available for retailers  to pick and choose—consumers get no say whatsoever. In fact, the bill  never mentions consumers, nor how they will benefit.  

It is abundantly clear that special interest groups are using the  federal government to alter the credit card market to benefit  themselves and not consumers. This is textbook rent seeking behavior, anathema to free market principles, and should be  staunchly opposed by Republican lawmakers.  

Furthermore, we oppose S. 4674 for the following reasons: 

• The bill does not promote competition, instead it dramatically expands the role of the federal government to  overregulate the market for credit cards. Today, requiring multiple dual-message networks to function over one card is  technologically infeasible. The cost of overhauling our current  credit system to comply with the mandates in the bill could cost  up to $5 billion.  

• The mandates in the bill are so costly that more than $60  billion in rewards that consumers receive every year would  largely disappear. According to the International Center for Law & Economics, “86% of credit cardholders have active  rewards cards, including 77% of cardholders with a household income of less than $50,000.”

• The bill authorizes the federal government to intervene in  contracts between private parties. The federal government  should not be interfering in private contractual agreements. This  encroachment will force small banks and credit unions to  severely limit or cease providing co-branded cards that millions  of consumers use every day. This is similar to how Biden’s  Securities and Exchange Commission is attempting to dictate provisions of contracts between private fund advisers and  investors.  

• There is no evidence that this bill will pass savings down to  consumers. A report from the Government Accountability  Office stated that if the regulations in the Durbin amendment  “had not been implemented, 65 percent of noninterest checking  accounts offered by covered banks would have been free.” Since  the enactment of the Durbin amendment, about 22% of retailers have raised prices on consumers while only 1% lowered prices.  Additional regulation on credit interchange will affect fees and  interest in the credit market, thus increasing costs for consumers. 

• Because the bill forces credit cards to allow access to all  networks, proprietary technology will be exposed to  competing networks, destroying incentives to create new and  innovative fraud protection and cybersecurity. As one paper points out, the routing mandates “largely undermine the  economics of networks and issuers.” 

• The bill is a perfect example of Congress ceding its Article I  authority to the Federal Reserve. All the provisions of this bill  require the Federal Reserve to draft rules to carry out its  mandates.  

Based on the points made above, we believe this bill is diametrically  opposed to free market principles. We encourage all lawmakers to  oppose this bill. 

Sincerely,  

Yaël Ossowski
Deputy Director
Consumer Choice Center