#2023-13, June 9, 2023

Credit Card Competition Act Reintroduced in Senate

Senators Dick Durbin (D – IL) and Roger Marshall (R – KS) reintroduced their Credit Competition Act in the U.S. Senate this week.  The bill has several bipartisan co-sponsors, and a companion bill exists in the House, as well.  As the same legislation was introduced last year by Senators Durbin and Marshall, it remains unclear if the bill has enough support to move through the Senate.  The bill is concerning for community and regional financial institutions that issue credit cards, and would adversely impact U.S. consumers, too.

The Credit Card Competition Act purports to increase competition and choice to reduce excessive credit card fees, in similar fashion to previously passed Durbin amendments and legislation affecting debit card transactions.  The bill requires the largest credit-card issuing financial institutions in the country – those with assets over $100 billion – to enable at least two credit card networks to be used on their cards.  This alleged protection for community financial institutions is a canard.  In fact, a study conducted by the U.S. Government Accountability Office (GAO) found that the Durbin Amendment is one of the most significantly harmful laws affecting the cost and availability of basic banking services.

The Federal Reserve has indicated that banks with assets under $10 billion see 25% less per-transaction interchange revenue in the post-Durbin market.  Artificially created shortfalls increase pressure to cut costs or increase banking fees across the entire industry.  As you know, merchants indicate that legislative fixes such as the Credit Card Competition Act will result in savings for U.S. consumers.  The Federal Reserve Bank of Richmond found a significant number of merchants failed to pass through realized savings to U.S. consumers from debit card regulation, with some larger merchants increasing prices.  It is not difficult to conclude what the impact would be to U.S. consumers should this new credit card legislation pass.

The MBA joined a letter crafted by the American Bankers Association along with 50 other state banking associations that urges Congress to reject the credit card routing bill.  To read the full letter, please click here.

To read Senator Peter Welch’s (D – VT) Press Release on the bill, please click here.
To read the Federal Reserve Bank of Richmond Brief on Durbin Impacts, click here.
The GAO Study may be read here.

CFPB Guidance on Enforcement of Section 1071 Rule

This week, the Consumer Financial Protection Bureau (CFPB) issued guidance on agency plans to enforce the final rule implementing Section 1071 of the Dodd-Frank Act (DFA).  As you know, the final rule is entangled in litigation through our colleagues at the Texas Bankers Association and a Texas-headquartered financial institution.

If implemented as indicated in the final rule, the CFPB intends to pay specific attention to lender response rates on data requests by loan applicants.  Response rates between peer groups, or financial institutions of similar size, geographic reach and type will be analyzed as the agency claims in its guidance that, “as noted in the rule, low response rates may indicate discouragement or other failure by that lender to maintain proper collection procedures consistent with the rule.”

The CFPB’s guidance on enforcement can be found by clicking here.