Opinion: Take a close look at the Credit Card Competition Act

By MELANIE LEVESQUE

Published: 02-02-2024 9:18 AM

Melanie Levesque is a former NH state senator.

As the first African American state senator in New Hampshire, I was proud to work to empower Granite Staters, not put stumbling blocks in front of them. Access to finance is key to empowering people to plan for the future.

The proposed Credit Card Competition Act (CCCA) is a concerning piece of legislation. I fear it will enrich big box retailers at the expense of consumers in already underserved communities. The CCCA, while seeming like a minor change to rules about how a relatively small fee is determined, will have a major impact on access to credit and only serve to price people out.

The CCCA proposes adding a routing mandate to our credit cards, which forces banks to open up credit cards to an additional payment processing network that retailers choose, rather than the card issuer’s preferred networks. While using networks with lower fees sounds good for everyone, will these savings be passed onto average Americans?

This has already been done with debit card transactions through the Durbin Amendment, a rule that is part of Dodd-Frank. The Durbin Amendment applied these changes to debit card transactions, allowing big box retailers to pocket $100 billion in extra profits. The Richmond Federal Reserve found 98% of retailers either raised their prices or kept them the same following the passage of the amendment. On top of that, banks and card issuers then needed to recoup those lost fees. As a result, free checking accounts became less common and consumer banking fees in general went up, taking these losses and putting them directly on consumers. We know that after the implementation of the Durbin Amendment, our country’s unbanked population increased by one million people.

All of that is compounded by the fact that the banking industry already leaves a lot of people behind, especially rural people and people of color. The Consumer Finance Bureau reports that rural Americans are more likely to live in banking deserts or areas without any banking branches in the vicinity. And for people who do have a bank account, inequities still exist. A CNBC survey from 2021 found that Hispanic and Black bank account holders pay two to three times per month in fees on average compared to white account holders. Adding the routing mandate to credit cards will only expand these issues to the consumer credit market.

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The CCCA will make it harder to find a no-fee credit card, much like the Durbin Amendment made it harder to find a free checking account. No-fee credit cards allow consumers to build their credit rating, taking a first step to secure home, car or business loans in the future. With the existing inequalities in the financial system, we know these rule changes will harm already underserved communities. In fact, The U.S. Hispanic Chamber of Commerce wrote to the CCCA sponsors and advised against the bill, stating that this could, “disproportionately harm small and minority-owned businesses, while producing a windfall to the largest businesses.”

We need policies that put more money into working families’ pockets and provide protections for consumers. I hope New Hampshire’s delegation in Congress will take a close look at the Credit Card Competition Act before acting on it.