The National Association of Federally-Insured Credit Unions took a shot at legislation expected to impose new restrictions on credit card transaction processing before it’s even been introduced.
The trade group, which represents not-for-profit credit unions that provide services to 135 million consumers, told congressional leaders in a letter Friday that a bill requiring more networks to be available for the processing of credit card transactions would be counterproductive. In its view, the legislation would benefit retailers, not consumers.
“This bill is unwarranted and represents a heavy-handed government intrusion into the credit card payments market that would hurt credit unions and consumers alike, while allowing the largest retailers to pocket significant cost savings,” the letter said.
The letter takes aim at the Credit Card Competition Act authored last year by Sen. Dick Durbin, D-IL, which is expected to be reintroduced this year after it failed to pass in the most recent session of Congress. That bill mandated that merchants have access to card networks other than Visa and Mastercard for routing credit card transactions.
A spokesperson for Durbin’s office didn’t immediately comment on the letter from NAFCU.
In its letter, NAFCU warned that passage of a bill to put curbs on the processing of credit card transactions would reduce its credit union members’ revenue from swipe fees and thereby limit loyalty programs, fraud protection and other benefits, like free checking, for customers. Without a portion of those interchange fees, they wouldn’t be able to offer the same services, they contend.
“Credit unions are committed to serving their members and, as such, must be able to make a reasonable return on payment card programs in order to continue to provide important consumer financial services, such as free checking accounts and member help lines when data breaches occur,” the letter said.
Associations representing merchants and retailers, meanwhile, continue to back the Durbin legislation. They argue that credit unions will be helped, not hurt, by Durbin’s proposal because it exempts financial institutions with less than $100 billion in assets, presumably giving the smaller players a lift in competing against their larger rivals.
“Only one credit union in the entire nation meets that test and the rest are exempt,” Doug Kantor, general counsel fo the National Association of Convenience Stores, said in response to the letter. “And, the exempt institutions would be more attractive to Visa and Mastercard — helping those small credit unions overcome the disadvantage they have in the market today.”
Trade groups representing those interests contend that the legislation would mainly affect the fee revenue streams flowing to Visa and Mastercard and the big-bank card issuers. They also note that the processing of credit transactions is more regulated in other countries, but the financial institutions are still able to offer sufficient services in those markets.
“Security would be improved by the bill because competition improves not just prices but services throughout the U.S. economy,” said Kantor, who is also an executive committee member of the Merchants Payments Coalition.
The previously introduced Senate and House bills were both put forward last year by bipartisan sponsors, but each failed to gain traction.
The bills would presumably have even dimmer chances of passage now that the House is under Republican control because Durbin, who is the Senate majority whip for Democrats, has been the lead backer of the bill.
Nonetheless, he has proven to be a determined and strategic sponsor of such efforts over the years, seeking to inject competition into a card network industry he argues is dominated by Visa and Mastercard. More than a decade ago, he helped win congressional passage of the Durbin amendment to the 2010 Dodd-Frank Act, which imposed new restrictions on the processing of debit transactions.
