Americans for Tax Reform has been consistently opposed to government regulation of debit and credit card transactions.
Last year, ATR opposed the Credit Card Competition Act (117th Congress; S. 4674) because, if enacted, it would have unnecessarily regulated credit card transactions. The bill as introduced was also an extension of the onerous Durbin Amendment from 2010 that imposed regulations on debit card transactions.
If this bill is reintroduced, ATR will maintain its current position in opposition to introduction, passage, and enactment.
The bill will severely reduce interchange fee revenue (the percentage of the transaction amount that is routed to the cardholder’s bank or credit union for providing services) to issuing banks, credit unions, and payment card networks. This revenue is used to fund rewards programs, pay for customer service, fund revolving lines of credit, produce physical cards, and invest in new cybersecurity for payment transactions.
If enacted the bill will likely do four things:
- Largely eliminate credit card rewards programs
- Put consumers personal privacy at risk because it will disincentivize future investment in fraud protection and enhanced cybersecurity
- Reduce the availability of revolving lines of credit
- Enable large retailers to pad their pockets while consumers and small businesses will see little to no savings at all
Who sponsored the bill?
- Last year, Senators Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) introduced the Credit Card Competition Act. Representatives Lance Gooden (R-Texas) and Peter Welch (D-Vt., who is now Senator Welch after taking over Pat Leahy’s seat) introduced an identical House version.
Why was this bill introduced?
- It was introduced at the behest of large retailers. This bill is an expansion of the Durbin Amendment, which was passed as a part of the Dodd-Frank Act in 2010.
What is the issue with merchant category codes and firearm retailers?
- The International Organization for Standardization (“ISO,” which is an international nongovernmental organization made up of national standards bodies that develops and publishes a wide range of proprietary, industrial, and commercial standards) decided in September 2022 to add a new merchant category code (MCC) for standalone firearm retailers. It was Amalgamated Bank (a union-owned bank) that urged the ISO to adopt this change.
- MCCs are four-digit numbers that networks use to identify types of merchants by the goods and services they sell. MCCs are not new. For example, each airline has its own MCC. MCCs can help consumers maximize their credit card rewards.
- The new MCC is for retailers whose primary business is firearms sales. Visa, Mastercard, Discover, and American Express are applying these codes to firearm retailers. The networks can only see the card number, the merchant’s name and location, the MCC, and the date and amount of transaction.
- The Credit Card Competition Act does nothing to solve the MCC firearm issue. Individual states such as West Virginia are introducing legislation to resolve this issue by prohibiting the use of firearm MCCs for any potential surveillance activities. While the parties involved are identical in both the bill and the MCC issue, they are entirely separate issues that should not be conflated.
- Congress should examine why the ISO is able to circumvent our elected representatives and impose requirements on American companies that could be put at a competitive disadvantage to foreign competitors. Just like the Basel Committee on Banking Supervision, the ISO possesses no supranational authority or legal force in the United States.
Read the full article on Americans for Tax Reform.