Consumers Don’t See Any Benefit from the Credit Card Bill, a Bankers’ Group Contends

Merchants and credit and debit card issuers have controlled the bulk of the narrative, pro and con, about the proposed Credit Card Competition Act since the legislation was reintroduced last year. But now a recent poll from Independent Community Bankers of America says that most consumers feel they would not benefit from passage of the legislation. 

The poll, conducted by Washington D.C.-based research firm Morning Consult, shows that 66% of U.S. adults surveyed say large merchants like Amazon and Walmart would likely choose cheaper, less-secure networks to process credit card transactions if the CCCA passes. In addition, 69% of respondents said merchants would likely keep their cost savings rather than pass them on to consumers. The sample size of the survey was 4,416 U.S. adults, ICBA says.

The CCCA would require financial institutions with $100 billion or more in assets to enable at least one network other than Visa or Mastercard for credit card transaction processing.

One concern consumers have about credit and debit transactions being routed over an alternative network is whether the network would adhere to the same zero-fraud liability policy for cardholders that Visa and Mastercard offer, according to a study conducted by the University of Miami, which the ICBA cited as a supporting document for its findings. 

“The CCCA raises the important question of what happens should a transaction be routed through an alternate network without Zero Fraud Liability guarantee,” the study says. “Would Mastercard or Visa assume all fraud liability even if the transaction is routed on another network from which they would receive no revenue, or would the second network effectively match or exceed current Zero Fraud Liability assurances?”

The study concludes that without zero-fraud liability assurance, “fraud liability would have to be reconceived in some way, and it would be easy to finesse an outcome that left consumers bearing some portion of it—with their liability effectively depending upon the routing choice of their retailer.”

Other concerns raised by ICBA’s study are that the bill would require expensive infrastructure investments and force the re-issue of hundreds of millions of credit cards, all while merchants would bank their acceptance savings.

“ICBA and the nation’s community banks strongly oppose controversial credit card legislation that would reduce access to credit card services in local communities, weaken cybersecurity protections, and end popular credit card rewards programs solely to benefit large retailers like Amazon and Walmart,” ICBA president and chief executive Rebeca Romero Rainey says in a statement. “Our latest polling shows Americans are likewise concerned about the risks of new credit card routing mandates.”

The ICBA also argues passage of the CCCA would “require credit card networks and issuers—including Main Street community banks—to change the technology that is currently used to conduct credit transactions.”

A majority of adults, including 54% of Democrats and 60% of Republicans, say consumers are likely to bear the costs of any such technology changes, the ICBA study says. In addition, 56% of respondents say the CCCA would have a negative effect on inflation, while 55% say the bill would have a negative effect on the economy, according to the study.

In response, the Merchants Payments Coalition counters that many consumer-advocacy groups support the CCCA, as its passage will increase competition among the card networks benefit merchants in the form of lower swipe fees. Those cost savings will in turn help them tamp down price increases, which will benefit consumers, advocates argue.

“A whole range of consumer groups have come out in favor of this bill. Do the bankers really have consumers’ interests at heart?” Doug Kantor, an MPC executive committee member and general counsel for the National Association of Convenience Stores, says by email. 

Kantor charges that card issuers falsely claim the sky is falling when attempts are made to rein in their business practices. “And they make the same false claims whether they are talking about fees they charge consumers, their capital standards, or fees they charge merchants,” he says. “Asking people if they want the sky to fall or not isn’t a legitimate way to measure consumer sentiment and doesn’t do anything to undermine the fact that people overwhelmingly support the Credit Card Competition Act.”