DCUC joins trade associations in letter to Senate: Credit Card Competition Act of 2023

WASHINGTON, DC (September 20, 2023)Dear Majority Leader Schumer, Minority Leader McConnell, Speaker McCarthy, and Minority Leader  Jeffries: 

The American Bankers Association, Association of Military Banks of America, Bank Policy Institute,  Consumer Bankers Association, Credit Union National Association, Defense Credit Union Council,  Electronic Payments Coalition, Independent Community Bankers of America, Mid-size Bank Coalition of  America, National Association of Federally-Insured Credit Unions, and National Bankers Association write  to express our strong opposition to the “Credit Card Competition Act of 2023” S. 1838 introduced by  Senators Dick Durbin and Roger Marshall, now being offered as Amendment #1161 to–the Military  Construction, Veterans Affairs, and Related Agencies Appropriations Act (H.R. 4366) currently being  considered by the Senate. As with the National Defense Authorization Act (NDAA) earlier this year, the  amendment sponsors are once again jeopardizing important defense related legislation, while attempting to  enrich the largest multinational retailers. 

Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and  benefit big box retailers by reducing the number of credit card issuers competing for consumers’ business,  removing a consumer’s choice of preferred card network, wringing out the competitive differences among  card products, limiting popular credit card rewards programs, and putting the nation’s private-sector  payments system under the micromanagement of the Federal Reserve Board. The Durbin-Marshall bill accomplishes this by using legislation to circumvent the free market to award private-sector contracts to a 

small handful of the sponsors’ favored payment networks to pad the profits of the largest e-commerce1and  multi-national2retailers who are raising prices on American families far more than the real rate of inflation3.  As then-Federal Reserve Board Vice Chair Lael Brainard stated last fall, retailer profits recently neared their highest levels since World War II4, but the global retail giants are demanding that Washington  intervene on their behalf, even as they reject measures to cap their sudden retail price increases. 

Contrary to its sponsors’ misguided claims, the adverse effects of this bill are clear: fewer options for  consumers, greater threats to consumer data and privacy, weakened community banks and credit unions,  and the disappearance of card rewards programs that families of all income levels5 use to stretch their  budgets.  

The federal government’s attempt to impose price controls by regulating interchange through Section 10756 (Durbin Amendment) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd Frank Act) was the purest example of a failed government policy. If the goal of the requirement that credit  unions and banks enter contractual relationships with many payment networks was to reduce costs to  consumers, then it failed. The Durbin Amendment has resulted in additional compliance burdens and related  business costs to financial institutions, a reduction in interchange revenue, and a massive transfer of money  to the largest retailers.7 Since the enactment of the Durbin Amendment in 2010, the financial services  industry (comprised of institutions of all sizes and charters) has been clear, consistent, and in lockstep in  our opposition to that destructive policy. The Durbin-Marshall bill manages to take a bad policy and make  it worse.  

1 The World’s Largest Retailers 2022: Pandemic Helps Amazon Cement Its Lead. Forbes. May 12, 2022. 2“Kroger CEO Rodney McMullen said on an earnings call with analysts Thursday, ‘A little bit of inflation is always good in our business.’ Kroger can pass off costs to consumers when inflation hovers around that mark, McMullen said, and ‘customers don’t overly react to that.’” Grocery stores are excited to charge you higher prices. CNN. June 18, 2021 

3“[A] Guardian analysis of top corporations’ financials and earnings calls reveals most are enjoying profit increases even as they  pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics. The analysis of  SEC filings for 100 US corporations found net profits up by a median of 49%, and in one case by as much as 111,000%. Those  increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or  bumped dividends to enrich investors.” Revealed: top US corporations raising prices on Americans even as profits surge. The  Guardian. April 27, 2022. 


4“[I]n the second quarter [of 2022], measures of profits in the nonfinancial sector relative to GDP remained near the postwar peak  reached last year… Similarly, overall retail margins—the difference between the price retailers charge for a good and the price  retailers paid for that good—have risen significantly more than the average hourly wage that retailers pay workers to stock  shelves and serve customers over the past year, suggesting that there may also be scope for reductions in retail margins. With  gross retail margins amounting to about 30 percent of sales, a reduction in currently elevated margins could make an important  contribution to reduced inflation pressures in consumer goods.” Prepared remarks of Federal Reserve Vice Chair Lael Brainard  at a financial services conference, New York, September 7, 2022. 

5Joint Bank and Credit Union Statement for the Record to the U.S. Senate Judiciary Committee. May 4, 2022.  6 Section 1075 of the Dodd- Frank Act amends the Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693 et seq.) to add a new  section 920 regarding interchange transaction fees for electronic debit transactions and rules for payment card transactions. 7 See Wang, Z., Schwartz, S., and Mitchell, N. (2014). The Impact of the Durbin Amendment on Merchants: A Survey Study.  Federal Reserve Bank of Richmond and Javelin Strategy & Research (“FRB Richmond Study”). Also See Haltom, R. and Wang,  Z. (2015). Did the Durbin Amendment Reduce Merchant Costs? Richmond Fed Economic Brief. Retrieved from: Stating that  after the Durbin Amendment was implemented, 98.8% of merchants did not pass-through savings realized from debit regulation  to consumers, and over 20% increased prices.

While big merchants are fighting against bicameral legislation that would scrutinize their spiraling price  increases amid rocketing retail profits8, they eagerly support the Durbin-Marshall federal price controls and  fail to mention that credit card acceptance9fees were recently reduced for small merchants and food stores.  We urge you to reject this cynical manipulation of our nation’s payments system for narrow financial gain 

for the nation’s largest retailers.  

Interchange is the Cost Merchants Pay for Services Provided 

The merchant discount fee (MDF) is the cost that retailers pay to their financial institution or card processor  in return for the many benefits associated with card acceptance: higher sales, a larger customer base,  reduced risk associated with handling cash, reduced bounced checks, and guaranteed payment. The  interchange fee is the portion of the MDF that the retailer’s financial institution pays to the cardholder’s  credit union or bank for the service of utilizing the card system. 

Merchants and consumers derive significant benefit from the current card system. In the moment the card  is run for payment, the transaction is instantaneously authorized, cleared, and settled – but to make that  possible, financial institutions incur operational costs for software, hardware, equipment, labor, network  processing fees, and transaction monitoring. These costs, as well as billing and collection, data processing,  fraud prevention, card replacement, customer inquiries, and customer service, are borne by the card issuer.  The card-issuing financial institution ultimately bears responsibility for fraud and insufficient funds, while  the merchant receives full, guaranteed payment for the goods and services rendered. 

Merchants cannot receive these benefits for free. The interchange fee is the cost of participating in the card  system. The credit card network allows merchants to avoid the cost of processing transactions and offers  them quick, guaranteed payment. This saves merchants the trouble and risk of extending credit to  customers, and it increases the number and value of sales they can make.10 The robust security features that  make credit cards so appealing to consumers come at a cost.  

Last year, the Federal Reserve published new research on credit card profitability, finding that net  interchange revenues for card issuers are slightly negative – card issuers spend more on providing benefits  to other parties in the transaction than they earn from transaction fees. The Net Transaction Margin (NTM)  has declined over time because interchange fees have been more than offset by increasing expenses. In fact,  NTM has been negative since 2016.11 

The Fundamental Difference for Credit Transactions 

The Durbin-Marshall bill purports to provide merchants with a choice of which networks credit card  transactions are processed across, but this dual-routing technology does not exist today, and for good  reason. Credit cards represent an extension of unsecured credit to a consumer, meaning financial institutions  make a loan every time a credit card is used to purchase goods and services from a retailer or merchant.  Although many view debit and credit cards as virtually indistinguishable, they are very different products  utilizing different networks. A credit card allows for instant access to a loan and does so over a network  

8 Companies use inflation to hike prices and generate huge profits, report says. NBC News. December 20, 2021 9 Visa to cut consumer credit fees for U.S. small businesses by 10%. Reuters. March 3, 2022. 10 See Ohio v. American Express Co., 585 U.S. (2018). 

11Adams, Robert, Vitaly M. Bord, and Bradley Katcher (2022). “Credit Card Profitability,” FEDS Notes. Washington: Board of  Governors of the Federal Reserve System, September 09, 2022, card-profitability-20220909.html

that was singularly developed for this purpose. Consumers have come to rely on credit cards from their  financial institutions to build credit and gain access to funds that otherwise may not be available to them.  The Durbin-Marshall bill will cause the cost of these loans to increase, leading to less spending power for  consumers and possibly a reduction in the important credit building aspect of credit cards. 

This extension of credit benefits both consumers and merchants. Consumers are not limited in making  purchases by the amount of money in their wallet or account, and merchants are able to make sales that  might not otherwise have occurred. Unlike merchants that specialize in selling groceries or shoes, financial  institutions are payments experts responsible for and best positioned to protect their customers against  fraud, loss of private data, and the inefficiencies of unreliable systems. Financial institutions’ card programs  allow small businesses to outsource credit risk and compete with large retailers without having to operate  their own card programs.  

This Legislation Hands Control of Our Nation’s Credit Card System to Breach-Prone Merchants 

Banks and credit unions help to cover a consumer’s costs when fraud occurs. Any reduction in interchange  fees would directly affect bank and credit union investment in fraud management systems and processes  that are dedicated to reducing fraud risk in the system—forcing institutions to increase costs to cover these  necessary expenses. 

From data breaches to skimmed cards, electronic payments are a prime target for bad actors. Every year,  consumers spend $9.1 trillion using credit and debit cards.12 Meanwhile, the rate—and cost—of criminal  activity is on the rise: 

  • 400+ million individuals were affected by data breaches in 2022,13 due in part to retailer  negligence.14
  • Over the past 5 years, fraud losses have more than doubled. In 2022 alone, $12 billion was  lost to fraud in the United States.15
  • Over $10 billion in losses were attributed to card-not-present fraud alone in 2022, up 70%  from 5 years ago.16
  • Between 2021 and 2022, there was a 30% increase in reports of consumer fraud losses.17

Financial institutions are examined for compliance with privacy, data security, and fair lending laws, while  merchants are not. As a result, interchange fees cover the costs of fraud detection, credit monitoring, and fraudulent purchase protection that make consumers and merchants whole when bad actors attack. When a  merchant’s systems are breached, or a card is otherwise compromised, financial institutions absorb a  significant portion of the costs: 

  • $2,618/card—The average fraud payout in 2022.18

12 The Nilson Report (2021). 

13 Identity Theft Resource Center, 2022 Annual Data Breach Report. report/?utm_source=press+release&utm_medium=web&utm_campaign=2022+Data+Breach+Report+ 14 For example, in 2019, Wawa reported a data breach affecting 30 million consumers and 5,000 financial institutions. Over the  past three years, they have paid financial institutions $28.5 million to make up for the costs associated with their negligence,  which included Wawa’s failure to take “adequate and reasonable measures to protect its point-of-sale payment terminals, fuel  dispensers, and payment processing servers,” according to the filings cited here: to-285m-data-breach-settlement/645145/. 

15 Euromonitor (2023) 

16 Euromonitor (2023) 

17 New FTC data show consumers reported losing $8.8 billion to scams in 2022. releases/2023/02/new-ftc-data-show-consumers-reported-losing-nearly-88-billion-scams-2022 

18 Fraud Reports by FTC. 2022.

  • Skyrocketing costs to replace contactless cards.19

Consumers have a wide variety of cards, processors, and issuing institutions to choose from when selecting  a card, and so their choice must be respected. The consumer expects that their choice will be honored, not  that the government will override their choice and place it in the hands of the merchant, who bears no risk.  The merchants are looking to undermine the will of the consumer and disregard the significant protections  and security that exist today to protect credit cards by routing the credit transactions to the cheapest  networks. Many of these alternative networks have underinvested in their platforms with little concern for  security innovations. 

If You Like Your Credit Card, You Can’t Keep It: Bill’s Mandates Render Existing Cards  Inoperable 

This bill requires much more than “routing choice” or two networks per card. It also contains an explicit  requirement that card issuers enable all types of transactions and security protocols, even if a bank or credit  union board finds that these methods are unnecessary, unaffordable, or unsecure. Supporting the whims of  any merchant in our large country would mean adopting many more than two networks, the only route to  avoid a costly enforcement action from regulators. Each time a network is added or changed to keep up  with merchant demands, hundreds of millions of new chip cards would have to be issued, inconveniencing  cardholders, exposing consumers to identity fraud through mail theft, and increasing the cost of the payment  system, particularly when there is a microchip shortage.  

Federal Agency Statistics and Courts Agree: The Credit Card Marketplace is Competitive 

Let us be clear: there is no deficiency in the current credit card processing system. To the contrary, it moves  millions of dollars a second with 99.999% reliability and remains hardened against security intrusions and  data theft. It provides protections like zero-dollar fraud liability for consumers and guaranteed payments  for merchants, the kind of benefits that might be taken for granted but aren’t available through other  payment methods. This 24×7/365 infrastructure is expensive and credit card interchange is a meaningful source of how it is financed.  

And with over 5,000 credit card issuers marketing directly to consumers, the credit card industry is  competitive, as confirmed by metrics used by the FTC and DOJ, and a recent U.S. Supreme Court decision  where no Justice found evidence of anticompetitive market structure20. And, in fact, the Court affirmed that  the credit card system is a “two-sided platform” in which no credit card transaction can occur unless both  the merchant and the cardholder agree to use the same network and thus, they “cannot raise prices on one  side without risking a feedback loop of declining demand.” Furthermore, the Consumer Financial Protection  Bureau (CFPB) found in their biennial consumer credit card market report that “In 2019 and 2020,  innovation continued to reshape the credit card market for both users and providers. New providers,  including large and small financial institutions as well as startup and mainstream technology companies  have entered—or are in the process of entering—the market with competing products, features, and  methods for issuing credit cards.”21 The list of market participants is extensive and includes new payment  systems for merchants such as Clover and Square.22 Retailers have also embraced Buy Now Pay Later  

19 Chip shortage drives up card costs. Payments Dive. May 26, 2022. up-card-costs/624317/. 

20 See Ohio v. American Express Co., 585 U.S. (2018). 

21 See Bureau of Consumer Financial Protection, The Consumer Credit Card Market (2021). 

22 The list of market participants is extensive: Visa, MasterCard, American Express, Discover, PayPal, Venmo, Zelle, Square,  Apple Pay, Amazon Pay, Samsung Pay, Kroger Pay, Walmart Pay, Target RedCard, Affirm, Klarna, AfterPay,

(BNPL) products where they are charged as much as 6% more than they would pay under the current  payment card system.23 

The vast majority of these card issuers are small community financial institutions based on the Main Streets  of America. For Americans who receive frequent marketing to try a new card, Representatives Gooden and  Welch’s claims that there is no competition in the credit card marketplace will come as a surprise.  

Durbin-Marshall is Anti-Free Market. It Guarantees Profits for and Steers Private Contracts to Its  Favored Card Networks 

This bill is not borne of real needs in the American payments system. It is about Congress picking winners  and losers. The Durbin-Marshall bill is a throwback to regulatory rent-seeking of the worst kind – reminiscent of the Washington-enforced Ma Bell phone network monopoly and the price fixing of the Civil  Aeronautics Board, when central planners limited choices and guaranteed corporate profits. In this case,  regulators will essentially award credit card franchises and routes to certain payment networks using  complex studies, policy task forces, and formulas not yet created. While its sponsors speak of increasing  options, this bill contains mandates that our members buy from certain companies, while prohibiting them  from choosing better and more secure options.  

Congress Should Not Force the Federal Reserve to Override Consumers’ Choice of Credit Cards  

The Durbin-Marshall bill is an overreach that should concern people of all political persuasions. It reaches  into the pockets of every American who uses a credit card and forces the vast majority of them to give up  their preferred card and chosen network in favor of a new, federally mandated regime. Our members think  that Americans are smart enough to pick what goes in their wallets without getting a government seal of  approval. By placing control of routing, a key part of transaction approval and authorization, into the hands  of the government, this bill crosses important civil liberty boundaries and leaves the door open for new  regulations at any time, reflecting the political perspectives of the appointees in power at that moment.  

The Durbin Amendment Hurt Community Banks and Credit Unions, Why Create a Sequel?  

This experiment has been tried before, with the Durbin Amendment on debit cards, leading to a precipitous  drop in the availability of low-cost banking services and free checking accounts for consumers. A recent  GAO report found that the Durbin Amendment was “among the top five laws and regulations most  cited…as having significantly affected the cost and availability of basic banking services.” Further, the  merchant lobby’s promise that this regulation would result in savings for consumers never happened – the  merchants pocketed the savings. According to the Federal Reserve Bank of Richmond, after the Durbin  Amendment was implemented, 98.8% of merchants failed to pass through savings realized from debit  regulation to consumers, and over 20% increased prices.  

Most dangerously, this central planning of the major conduit for money in our economy will reduce access  to banking services and harm community financial institutions. While supposedly “exempt” from the  Durbin Amendment, community banks and credit unions still suffered a 30% decrease in their interchange  revenue. Though the restrictions for “exempt” issuers are not explicit price controls, they have the same  practical effect of distorting the market and transferring wealth from community financial institutions and  consumers to a handful of high-volume, highly profitable large merchants. There is no surer way to disrupt  

Google Pay; in addition to bank and credit union led person-to-person payment capabilities; also, European account to account  (a2A) payments firms are in the process of entering the U.S. market. 

23 See Riley, B. (2021). The Buy Now Pay Later Merchant Proposition: Credit Card Interchange is Cheaper. 

the economics of small credit card issuers than to enact this legislation, which will wipe out already-thin  margins of lower-volume issuers, causing them to leave the credit card market and concede the product  category to larger firms better able to absorb these changes.  

For the numerous reasons laid out above, and to protect consumers and banks and credit unions alike, we  urge you to oppose the Credit Card Competition Act of 2023. 


American Bankers Association 

Association of Military Banks of America 

Bank Policy Institute 

Consumer Bankers Association 

Credit Union National Association 

Defense Credit Union Council  

Electronic Payments Coalition 

Independent Community Bankers of America 

Mid-size Bank Coalition of America 

National Association of Federally-Insured Credit Unions 

National Bankers Association 

cc: Chairman Brown, Ranking Member Scott, Chairman McHenry, Ranking Member Waters

About Defense Credit Union Council (DCUC)

The Defense Credit Union Council is the premier resource for credit unions on all military and veteran matters. By maintaining a close and constant liaison with the Pentagon, Capitol Hill, and NCUA, the Council champions the interests of credit unions serving our military and veteran communities by coordinating policy, procedures, and legislation impacting morale and welfare, financial readiness, and the delivery of quality financial products and services. Organized in 1963, the Council’s membership is comprised of 180 credit unions with over 35 million members. If you would like more information about this topic, please contact DCUC at


Haleigh Laverty
Cell 202-734-5007



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