St. Charles Times

O’Fallon small business owner Ashley Nordman said credit card regulations sponsored by U.S. Sen. Josh Hawley (R-Mo.) could lead to higher costs and less security for business owners like her.

“The bill, misleadingly titled the Credit Card Competition Act (CCCA), would open up credit card processing to untested, less secure payment networks, significantly increasing the risk of fraud and data breaches,” wrote Nordman, owner of skin care products company AN Skin, in the Missouri Independent. “If forced to use these alternative, less secure payment networks, the consequences for small businesses like mine would be dire.”

“Although the supporters of this bill claim it will help small businesses save money, I’m concerned that only larger retailers will see any true benefits if it passes,” wrote Nordman. “Small businesses don’t have the same leverage that these large merchants have to negotiate lower rates for themselves, meaning small business owners like me would get stuck with higher costs while the large corporations pocket any potential savings that would come from the bill.”

S. 1838, the "Credit Card Competition Act of 2023," originally sponsored by U.S. Sen. Dick Durbin (D-Ill.), would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. 

Financial researcher Glenn Grossman said the bill could lead to an increase in credit card fraud among Missourians, reported Show-Me State Times on April 25.

“If the CCCA were to be approved the routing of credit card transactions would move from a ‘single pipe’ to ‘multiple pipes’ of data flowing from merchants to issuers,” said Grossman. “Today, card issuers depend on the networks to profile and identify fraud.”

“They see all the transactions on their network and have developed fraud detection capabilities that would not be possible in a fragmented structure the CCCA would create,” he said. 

He said that Visa has invested billions on fraud detection. 

“The investment builds trust and in return consumers use their credit cards,” said Grossman. “Zero liability means something to consumers.”

“With the CCCA, it is possible that promise is gone,” said Grossman.

In a report released in July 2023, "The True Impact of Interchange Regulation: How Government Price Controls Increase Consumer Costs and Reduce Security", Grossman wrote that studies show 79% of consumers choose credit cards as a payment option because of their data security.

Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told Show-Me State Times last month that the bill is “bad policy” that could result in higher prices for consumers.

“This is bad policy – it is effectively a price control, and likely a forerunner to an explicit price control, and it micromanages one segment of a consumer market at the expense of everyone else,” said Michel.

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.” 

“The results of the Durbin Amendment have not been good – people ended up with higher fees and fewer rewards programs for debit cards, and the evidence shows that, for the most part, merchants did not pass any cost savings on to consumers,” said Michel. “This legislation would spread similar regulations throughout the credit card market, and the results would likely be the same, only more widespread.”

S. 1838 is currently pending in the U.S. Senate Committee on Banking, Housing, and Urban Affairs.