Bank, credit union groups unite against Welch-Gooden bill

The American Bankers Association today joined seven bank and credit union trade groups in a joint letter opposing a House bill seeking to create new credit card routing mandates that would affect banks that issue credit. The proposed legislation (H. 8874), introduced by Reps. Peter Welch (D-Vt.) and Lance Gooden (R-Texas), would require covered credit card issuers to add a second network to their customers’ cards, but banks would only be allowed to choose from certain options set by the Federal Reserve. In their letter, the groups said the legislation circumvents the free market to award private-sector contracts to a small number of payment networks in order to pad the profits of the largest e-commerce and multinational retailers.

“Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and benefit big box retailers by reducing the number of credit card issuers competing for consumers’ business, removing a consumer’s choice of preferred card network, wringing out the competitive differences among card products, limiting popular credit card rewards programs and putting the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board,” the groups said.

The Welch-Gooden bill is similar to ABA-opposed legislation introduced by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.). Similar to the proposal in the Senate, the groups said the House bill duplicates the mistakes of the 2010 Durbin Amendment on debit cards, which led to a drop in the availability of low-cost banking services and free checking accounts for consumers.

“There is no surer way to disrupt the economics of small credit card issuers than to enact this legislation, which will wipe out already-thin margins of lower-volume issuers, causing them to leave the credit card market and concede the product category to larger firms better able to absorb these changes,” the groups said.