Credit Card Competition Act legislation, which could put consumer's rewards at risk, is being reintroduced in Congress.
Sens. Roger Marshall, R-Kan., Richard Durbin, D-Ill. and J.D. Vance, R-Ohio, reintroduced the legislation that aims to reduce swipe fees for credit cards by increasing competition within the industry, but it would also remove the key funding mechanism of rewards. Durbin and Marshall first introduced the bill in the Senate last July.
The bill would require that two competing networks be enabled on a credit card. It would no longer just be Visa or Mastercard – a smaller, competing network would have to be enabled on the card. Independent networks usually charge a lower fee, according to the National Retail Federation (NRF).
The fees currently average 2.24% of the purchase amount and can drive up prices paid by consumers by more than $1,000 a year for the average family, the NRF said.
"It's time for big banks and global card networks to compete the same as small businesses do every day," NRF Chief Administrative Officer and General Counsel Stephanie Martz said in a statement. "Skyrocketing swipe fees have been driving up prices for consumers for far too long, and we are confident this is the year Congress is going to say it's time for that to stop. Competition will bring these fees under control and strengthen security at the same time."
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However, the National Association of Federally Insured Credit Unions (NAFCU) said the legislation doesn’t promote competition and instead limits consumers' choices and any expected reward points from transactions. At the same time, the bill would increase credit unions' costs when it comes to administering credit card programs and, by default, limit their lending capacity.
"We are disappointed that Senators Durbin, Marshall, Welch and Vance have again introduced the harmful and misleading Credit Card Competition Act," NAFCU President and CEO Dan Berger said in a statement. "Expanding interchange price controls and routing mandates to credit cards is bad policy, pushed by big box retailers who are looking to pad their bottom line.
"Contrary to merchants' deceptive claims, data shows consumers end up paying more across the board – from higher prices of goods to more expensive card products at their financial institutions, and fewer rewards and benefits on their card purchases," Berger continued.
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How credit card companies charge late fees are also up for change. The Consumer Financial Protection Bureau (CFPB) has said it wants to change how much consumers are charged for late fees, but industry experts have said the change could cost those who pay their bills on time.
In February, the consumer watchdog announced a proposal to amend the existing provision to late fees. It proposed to cap late fees to 25% of the required payment and end the automatic inflation adjustment for these charges. Credit card companies could still charge late fees, but under the new provision, they must prove that their fees align with their collection costs. The move to lessen late fees could save millions of Americans as much as $9 billion a year, the White House said in a press release.
Experts who oppose the late fee changes have said they are concerned that existing credit card users, who pay their bills on time, could be penalized. The majority of Americans don't make late payments, wouldn't see any cost savings, and could carry the brunt of increased costs arising from card issuers having to recoup that money in other ways, according to Bill Hulse, a vice president at the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.
About 56% of credit card users opposed the CFPB proposal on late fees if it meant increased costs for all cardholders, a recent survey conducted by FGS Global said. Moreover, 82% said charging a late fee to users who didn't pay bills on time was fair.
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