Fees & security at risk with proposed legislation

People helping people is a guiding principle of the credit union philosophy and at Suncoast Credit Union we know it takes a village. We, as a credit union community, need to be clear in communicating with our members about why we oppose the proposed Credit Card Competition Act.

Right now, this proposed bill would weaken a payments system that already exists for interchange fees, a fee that merchants and retailers pay for the privilege of accepting quick payments and immediate approvals to process credit and debit card transactions. The current system works in the best interest of consumers and businesses and very importantly, keeps consumer data secure. The legislation would allow merchants to choose the cheapest, likely least secure, network, and we believe consumer data would inevitably be made vulnerable. This bill would also allow foreign networks to enter the market, seriously jeopardizing a system that already works in the best interest of consumers and small business.

Under the proposed Gramm Leach Bliley Act, institutions are required to secure consumer data, but merchants are not required to follow a similar standard, leaving consumers vulnerable.

Based on a similarly passed amendment (known as the Durbin Amendment) that promised to have savings passed along to consumers, history has proven that to be incorrect and ineffective; and it is possible that fees will increase, and that personal data could be at risk if merchants select the cheapest payment systems that are most likely the least secure. Numerous studies (the Richmond Fed) have found that 98% of merchants never passed down savings to consumers under the original Durbin Amendment and that 20% of merchants increased prices. Claims of consumer savings are routed in falsehoods. In addition, this amendment would likely slash the travel and cash back rewards that consumers of all income levels use to make the most of their money.

The interchange fees help cover the costs of guaranteeing payments, security infrastructure and recovering expenses that may result due to fraud, along with other administrative costs. The fee is shared by the payment networks, processors, and financial institutions.

If this bill passes, rather than using a trusted and secure network that has proven to be effective, retailers could choose the networks used to process payment transactions, enabling them to choose the cheapest networks that are likely less secure from a fraud perspective, without considering possible harm to all financial consumers.

While this legislation would have a tremendous impact on the income we depend on to protect members from fraud, we are more concerned about the impact this will have on the security of consumer data.

We urge you to communicate with your team and your members to ensure that this information is available and shared widely. Every credit union member should feel emboldened to contact elected congressional representatives and ask them to vote no on the Credit Card Competition Act of 2023. Time is of the essence, so please act now.