Dick Durbin is coming for your credit card rewards

Big box retailers will stop at nothing to protect their huge profits, maintain their economic power and strengthen their political influence. The latest ploy to accomplish this relentless obsession: kill American credit cards.

The nation’s big-box retailers are bringing together dozens of big-box giants, global fast-food chains and convenience-store juggernauts to push through new government mandates for credit cards. These retail giants have formed an alliance with a few lawmakers to disrupt the payment system as we know it, with disastrous consequences for Main Street financial institutions and consumers alike.

The worst part is that we have already seen this story.

When Congress enacted legislation to regulate interchange — the nominal fee retailers pay to process credit or debit card transactions — critical resources were taken away from smaller financial institutions; resources that local banks and credit unions use to provide consumers with safe and affordable financial products. Despite reports from several nonpartisan government organizations – including the Federal Reserve and the GAO – showing that regulatory intervention in the free market operations of payment systems ultimately results in consumer harm (not price savings) , lawmakers plod along to make sure history repeats itself and Main Street loses.

SOME CONSUMERS USING CREDIT CARD REWARDS TO PAY FOR ESSENTIALS Amid HIGH INFLATION

The backstory

Following the enactment of the so-called Durbin Amendment in 2010, legislation passed as part of the Dodd-Frank Act that created new price controls and government regulations on debit card transactions, big box retailers have pocketed a multi-billion dollar wealth transfer on his back. consumers, small businesses and community and regional banks. Meanwhile, the cost of banking services has risen for millions of average consumers – the availability of free checking accounts has shrunk by 40%, debit card rewards programs have evaporated, and a million Americans have lost out completely. access to the traditional banking system.

For community and regional banks like the ones I represent as head of the Florida Bankers Association, the Durbin Amendment has generated tons of new red tape, increasing compliance burdens and wiping out critical revenue for everything from underwriting new applications to expanding access to free and low-cost services. fee verification products.

Adding insult to injury, the cost reductions promised by Big Box merchants when they lobbied for debit card regulation never materialized. In fact, 98% of retailers either failed to reduce prices as announced or actually increased them (77.2% unchanged, 21.6% increased).

The Credit Card Competition Act

Fast forward 12 years and the Big Box lobbyists and their leftist champions are back – this time pushing to extend the 2010 debit settlements to credit cards. Democratic Sen. Dick Durbin of Illinois, namesake of the original Durbin Amendment, joined this time by Republican Sen. Roger Marshall, is teaming up with big-box retailers to deliver another massive donation to big-box chains. surface at the expense of Community and regional banks and consumers.

The misleadingly named Credit Card Competition Act aims to increase competition in the credit card industry. In fact, it would do just the opposite. On the one hand, it would effectively eliminate consumer choice by allowing retail chains to route their customers’ transactions through the cheapest credit card network, regardless of security capabilities or credit card offerings. rewards. In a free market economy, customers select their credit cards based on a range of factors, including the benefits and protections they offer. And they assume those benefits and protections will be honored every time they use their credit card to make a purchase. But while that is the case today, the Durbin/Big Box Retailers program would allow retailers to bypass their customers’ preferred networks – those to which their rewards, benefits and security protections are attached – to select the cheapest, and probably the cheapest. secure network.

The result would be an almost guaranteed increase in credit card fraud, a nightmare for consumers and community banks. And the rewards consumers love and rely on for everything from cash back to travel perks? Faded away. The vast majority of exchange revenue that banks receive goes back into the pockets of consumers in the form of rewards, so cutting that revenue would almost certainly mean the end of rewards programs as we know them.

What Senator Durbin conveniently overlooks is that when a Main Street consumer is defrauded of their bank account as a result of a purchase made at a big box retailer, the consumer does not call not the retailer to repair the fraud and have the funds deposited back into their account. It is the bank that will return the funds to the consumer, not the big box retailer.

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Retail profits are now near their highest levels since World War II. At a time when these merchants are raising prices for American families above the true rate of inflation, the big-box chains are looking for more government help. Worse still, they are now trying to introduce this cynical proposal into the National Defense Authorization Act, unavoidable legislation intended to support national defense and military spending. This is the last place an amendment strengthening the results of Walmart and Amazon belongs.

If Big Box retailers really wanted to help veterans and the military, they could start by committing to keeping their prices in line with the actual rate of inflation. Instead, they attempt to steal credit card rewards from military families while weakening data security for all of us. American families deserve better, as do Main Street and American community and regional banks.

Alex Sanchez is President and CEO of the Florida Bankers Association and served on the Advisory Board of EXIM Bank.

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