OBL and State Banking Associations Oppose Credit Card Competition Act of 2022


The Credit Card Competition Act of 2022, introduced by Senators Roger Marshall (KS) and Dick Durbin (IL), proposes new credit routing mandates that would give retailers—not consumers—the power to decide which credit card network transactions would be routed over—all so that mega retailers can make more money. Consumers, small businesses, and small financial institutions will lose big if this happens. 

The OBL has signed onto a letter in opposition to this proposed legislation in conjunction with other state banking associations.

1. Credit Routing Mandates Will Hurt Consumers:

Consumer Choice for Credit Cards Would Disappear. Instead of consumers picking what network they prefer, merchants could force them to go with the cheapest option.

Credit Card Rewards Programs Would Disappear. Companies invest billions in rewards and benefits to attract customers. Without the competitive incentive to invest, those programs will disappear. The original Durbin Amendment debit routing mandates resulted in reduced fee or low-cost banking services for thousands of consumers. Additionally, a 2014 study by George Mason University found that the Durbin Amendment increased the unbanked population by one million Americans—primarily in minority and low-income communities.

Cybersecurity Will Be at Risk. If merchants are allowed to simply choose the cheaper networks that have not invested in the latest security technology, consumer payment data would be vulnerable to foreign networks. This bill is a sure-fire way to provide more private consumer information to unreliable foreign networks.

Prices Will Rise for Consumers. Establishing a dual-routing system will represent a significant expense raising costs for consumers.


2. Credit Routing Mandates Will Hurt Small Businesses:

Credit routing mandates would hurt small businesses when they are still recovering from the economic impact of the pandemic. With billions driven from the credit market, lenders will be forced to reduce small business lending to recoup their losses.

Small businesses will face a higher cost of acceptance increasing the cost of doing business when they can least afford it.

Small merchants also stand to lose valued services provided by card issuers and payments networks, such as monitoring and preventing fraud, implementing new fraud prevention technologies, and maintaining and improving the U.S. electronic payment system infrastructure

Research by Javelin Strategy & Research reveals that for most small merchants, the value of services received from electronic payments providers is more important to them than price.  Given the high value that small merchants place on high-quality payment processing services, the concerning corollary is that as regulators limit interchange prices, the quality of service they receive will decline.

Routing mandates reduce merchant satisfaction with electronic payments while in many cases also increasing their costs — paradoxically putting many small merchants in the position of paying more for less.


3. Credit Routing Mandates Will Hurt Small Financial Institutions

Credit routing mandates are a backdoor price control on small community banks, imposing the same routing mandates as large multinational banks. This price control is like the flawed 2010 Durbin Amendment that regulated debit cards. Small financial institutions stand to lose between $5 billion and $9 billion in annual interchange revenue from these mandates that do nothing to improve the market for consumers.

Compared to January 2011 — just before the Durbin Amendment took effect — the average inflation-adjusted interchange fee for “exempt” issuers dropped by more than 30% for single-message transactions and fell by 10% for dual-message, reducing total interchange revenue compared to what would have been generated without the Durbin Amendment.

In addition to reduced revenue, Federal Reserve data shows that covered banks with lower debit volumes (e.g., community banks and credit unions) face per-transaction costs related to authorization, clearing, and settlement (ACS) services that are 20 times higher than larger banks. These institutions typically have a lower number of debit transactions than larger covered issuers, which makes it more difficult for them to absorb ACS-related costs.

Routing mandates on credit cards will only further restrict lending for small businesses and individuals from banks and credit unions and eliminate credit card rewards and promotions, thus narrowing choices for consumers.


4. Answering Questions About Small Bank Exemptions Included in Legislation:

Exemptions Do Not Work. Although the Durbin Amendment supposedly exempted community banks and credit unions from debit routing mandates, data from the Federal Reserve clearly show that interchange revenue fell for these entities as well, for both PIN and signature transactions.

In addition to reduced revenue, recent Federal Reserve data shows that community banks and credit unions also face higher costs as a result of the Durbin Amendment. These institutions typically have a lower number of debit transactions than covered issuers. This means it is more difficult for them to absorb costs compared to larger issuers with a higher number of transactions. Due to their reduced revenue after enactment of the Durbin Amendment, community banks and credit unions, the so-called “exempt” issuers, have less money to pay for more services.


The impacts of this bill are clear: fewer options for consumers, weakened community banks and credit unions, and the disappearance of card rewards programs that families use to stretch their budgets.


While big merchants are fighting against bicameral legislation that would scrutinize their spiraling price increases amid rocketing retail profits[1] they eagerly support the Marshall-Durbin federal price controls.  They fail to mention that credit card acceptance fees were recently reduced for small merchants and food stores. We urge you to reject this cynical manipulation of our nation’s payments system for narrow financial gain.



[1] Companies use inflation to hike prices and generate huge profits, report says.  NBC News. December 20, 2021