A bill that lawmakers say will create more competition in the credit-card business and pressure industry fees “is still unlikely to pass in any form, but it’s still alive,” according to an analyst.
The comments from Capital Alpha Partners managing director Ian Katz come as Sen. Dick Durbin, an Illinois Democrat, and Sen. Roger Marshall, a Kansas Republican, look to attach their credit-card routing bill as an amendment to the National Defense Authorization Act.
Durbin and Marshall introduced the Credit Card Competition Act as standalone legislation in July, saying that the bill could lower industry credit-card fees by requiring that merchants have the choice between at least two credit networks when processing transactions. Rep. Peter Welch, a Vermont Democrat, and Rep. Lance Gooden, a Texas Republican, introduced a similar bill in the House of Representatives in September.
The bill takes inspiration from what already exists in the debit-card world, as the post-financial-crisis Durbin amendment introduced rules around debit routing. (That legislation also specifically capped interchange fees on debit.)
Durbin and Marshall said in a Monday press release that in addition to introducing the Credit Card Competition Act as an amendment to the NDAA, they were also introducing an amendment that would ask for a report on the effects of a current law that makes some veterans pay surcharge fees to cover swipe fees when they use cards at military commissaries.
“As credit-card swipe fees continue to increase at a rate detached from reality, it is critical we make sure those who served and are serving this country are not being unfairly taken advantage of,” Marshall said in the statement.
At the time that Durbin and Marshall first introduced the card-routing bill, some analysts questioned whether it would gain enough traction to pass through Congress. Legislation impacting credit-card swipe fees didn’t seem to be a high-priority area in the current climate.
Though the bill targets Visa Inc.
and Mastercard Inc.
several analysts have suggested that any new rules would have a greater impact on banks, which receive interchange fees that are paid by the merchant to card-issuing banks. A banking trade group voiced opposition to the measure in a statement provided to MarketWatch.
“A proposed government mandate that will rob military families of their credit -card rewards and undermine their data security has no business being added to annual legislation designed to bolster our national defense, much less enacted into law,” Rob Nichols, the president of the American Bankers Association, said. “We will aggressively oppose this misguided bill and ask every lawmaker to reject including it in the NDAA.”
The Electronic Payments Coalition, which counts Visa, Mastercard, and other financial-services companies among its members, called the insertion of the bill inside the NDAA a “Trojan horse” move.
“This is a cynical political ploy — using a bill that funds our military and veteran benefits — to try and sneak in a giveaway to mega-retailers at the expense of destroyed credit-card rewards and cash-back savings for millions of American families,” EPC chairman Jeff Tassey said in a statement provided to MarketWatch.
Capital Alpha’s Katz wrote Sunday that the NDAA “is considered must-pass legislation,” likely why Durbin and Marshall are trying to get their bill attached to it. “The effort feels like a desperation move because Durbin and Marshall don’t believe the bill could pass as a standalone.”
He further noted that the card-routing bill “has nothing to do with defense,” something that’s “not an insurmountable obstacle, but for unrelated legislation to latch onto a bigger bill it typically needs broader support than this one has.”
Neither Durbin nor Marshall serve on the Senate Armed Services Committee, he added. Plus, he said that banks have been warning lawmakers that the card-routing law could curtail credit-card rewards.
“Lawmakers love their rewards,” Katz said.
Politico has reported that ” just a bare bones group of lawmakers” will kick off debate on the NDAA on Oct. 11, but a final vote isn’t expected to take place until after November’s midterm elections.