Banking Groups Slam the Credit Card Competition Act, Warning of Harmful Consequences

The Credit Card Competition Act (CCCA) aims to increase competition on the processing side of a card transaction. Senator Richard Durbin (D-IL) and other lawmakers have supported the act in the past, and Durbin plans to reintroduce the bill soon. 

But the CCCA faces criticism from banking groups that claim it harms various participants in the credit card industry. 

We’re still waiting to see the details of Durbin’s latest edition of the Credit Card Competition Act. But it stands to put card networks in its crosshairs, particularly industry behemoths Mastercard and Visa.

The 2023 version of the CCCA sought to require the country’s largest financial institutions that issue credit cards “to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than the Visa/Mastercard duopoly.”

These are financial institutions that issue credit cards and have assets in excess of $100 billion. Durbin’s position on the state of credit card processing indicates that smaller merchants may feel they have their backs against the wall when it comes to choosing which payment network to use.

“Across Illinois, the story is the same — small businesses are faced with exorbitant credit card fees and a ‘take it or leave it’ choice imposed by Visa and Mastercard,” Durbin said in a press release.

Card use grew by nearly 6% across the U.S. in 2024.

The pending reintroduction of the Credit Card Competition Act comes at a time when card use of all types is growing in the U.S. Card spending across American Express, Discover, Mastercard, and Visa cards topped $10.7 trillion in 2024, according to recent data from the Nilson Report. The 2024 figure represents a 5.9% increase over card spend in 2023.

Lawmakers have also taken aim at credit card interchange in recent months. The Interchange Fee Prohibition Act intends to exclude the sales tax and gratuity portions of a credit or debit card transaction from interchange charges. That act is set to take effect on July 1, 2025, but it also faces opposition from banking groups. 

The Chicago Sun-Times published commentary from Rob Karr, President and CEO of the Illinois Retail Merchants Association, on March 31. In the commentary, Karr expressed optimism that the Credit Card Competition Act could also lower interchange charges, or, as he refers to them, “swipe fees.”

“The policy leverages the power of free market competition,” Karr wrote. “The change would encourage credit card networks to compete for the business of retailers of all types and sizes — pressuring “swipe fees” to fall. After all, as with nearly every other industry, more choice and competition bring lower prices and better service.”    

Competition can breed innovation, but the Credit Card Competition Act also appears to be stirring up anxiety among banking groups.

Numerous financial industry groups, including the  American Bankers Association, America’s Credit Unions, and the Independent Community Bankers of America, sent a letter to Congress last week detailing their concerns with the CCCA.

In the letter, the groups highlighted stakeholders, including consumers and small businesses, that it believes will be harmed by the federal government’s passing of the act.

Credit card companies can use interchange fees to pay for rewards consumers and businesses can access when they complete transactions with their cards. A report from the International Center for Law & Economics details that rewards appeal to a broad spectrum of consumers.

The report reveals that 86% of credit card users own active rewards cards, including more than three-fourths of those with household incomes under $50,000.

The letter from the banking groups calls attention to the fact that although merchants may save money from increased competition that they can pass on to cardholders, they could also pocket those savings. Government stipulations for payment routing preferences may also impact the availability of credit cards for a portion of consumers.

“Reducing interchange fees through government-mandated routing would diminish or eliminate access to credit cards for low-income consumers or those with damaged credit, putting more Americans at financial risk,” the groups wrote in their letter to Congress.

Though reduced interchange fees stand to line some merchant pockets, the financial industry groups found that larger stores may profit much more from the Credit Card Competition Act than smaller ones. 

The groups cited an analysis conducted last year by the University of Miami that suggests that savings realized from the CCCA “will accrue to retailers with $500 million or more in annual sales, with little going to small businesses.” 

The CCCA may not provide much benefit to small businesses.

The banking industry’s letter notes that small businesses may join consumers in facing diminished credit card rewards if the CCCA moves forward. The University of Miami analysis estimates that small businesses earn approximately $12 billion in credit card rewards — or about 10% of all rewards from credit card purchases — through company card spend.

But under the CCCA, small businesses may lose more than $1 billion in rewards, which would impair their ability to be competitive with larger companies, the analysis says. 

Those most affected by the proposed Credit Card Competition Act will likely continue to scrutinize it as it heads before lawmakers, as anticipated. The banking groups that expressed their thoughts about the CCCA in a letter to Congress have made their opinions clear.

The payment system for cards “protects consumers against fraud, guarantees businesses receive timely payments, funds rewards programs like cash back, and powers the American economy, from brick-and-mortar establishments to innovative e-commerce platforms 24 hours a day, seven days a week, 365 days a year,” they wrote.

“The so-called Credit Card Competition Act, and any other legislation that intervenes in the credit card market, puts all that in jeopardy.”