Milwaukee City Wire

An economist with the International Center for Law & Economics (ICLE) said that credit card regulations proposed in Congress would reduce competition among credit card issuers. 

Those credit card regulations are opposed by the Wisconsin Bankers Association (WBA), reported The Sconi in January.

“In 2022, and then again in 2023, Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) introduced legislation that would have required U.S. issuers of most Visa- and Mastercard-branded credit cards to include a second network on their cards, and to allow merchants to route transactions on a network other than the primary network branded on the card,” wrote Julian Morris, senior scholar at the ICLE, in the Truth on the Market blog on Feb. 12. “A recent study by Oxford Economics, however, cautions that such legislation could do immense harm to the American economy.”

“The legislation was misleadingly called the Credit Card Competition Act (CCCA), on the spurious grounds that it would ‘enhance credit card competition and choice in order to reduce excessive credit card fees,’” Morris wrote. “As I noted in a previous paper, by forcing most U.S. credit-card issuers to include a second network on all their cards, the CCCA would actually remove the choice of network from both the issuer and the cardholder, and place it in the hands of the merchant and the acquiring bank. By forcing networks to compete mainly on price, rather than other attributes, this would almost certainly reduce competition among issuers. As such, the legislation should really be called the Credit Card Anti-competition Act.”

Morris has been a senior scholar at ICLE since Feb. 2020. Based in Portland, Oregon, the ICJLE is a nonprofit, nonpartisan research center that promotes the use of law and economics methodologies to inform public policy debates.

Originally sponsored by U.S. Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kans.), the so-called Credit Card Competition Act would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. Opponents to the bill argue that if given the choice, retailers would likely choose cheaper, less secure networks for processing transactions, thereby exposing consumers to increased securities and fraud risks.  

The bill applies to credit cards what a similar measure in 2010, often referred to as the “Durbin Amendment,” applied to debit cards. The 2010 measure was a requirement of the “Dodd–Frank Wall Street Reform and Consumer Protection Act.”

Nationally, the bill could lead to a $227 billion loss in U.S. economic activity and 156,000 lost jobs, according to an analysis conducted for the Electronic Payments Coalition (EPC) by Oxford Economics Research (OER).

OER is a global advisory firm that provides economic forecasting and analysis. The company was founded in 1981 as a commercial venture with Oxford University’s business college. It offers research on economic trends, policy, and industry performance for governments, businesses, and financial institutions. The firm operates offices in various regions, including North America, Europe, and Asia. Oxford Economics produces reports and data covering global and regional economies, industries, and markets.

The EPC is a trade association that represents credit unions, community banks, and payment card networks. The coalition advocates for policies that protect and promote the use of electronic payments.