Lawmakers in both parties and both Chambers of Congress are supporting legislation that would expand portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), taking away benefits that tens of millions of consumers across the country enjoy, including travel and loyalty reward programs. 

The Dodd-Frank Act included an amendment by Sen. Dick Durbin (D-Ill.), known as the Durbin Amendment, that imposed a limit on interchange fees that banks charge retailers for debit card transactions.  Supporters of the original amendment claimed that because retailers would be charged less, those savings would be passed on to consumers in the form of lower prices.  However, the promised results never came to fruition.  Instead, banks and card issuers had less revenue and responded by doing away with rewards programs for debit cards.  According to a 2013 University of Chicago Law School report on the impact of interchange fee caps, consumers lost between $22 and $25 billion as a result of the implementation of the Durbin Amendment.

Despite the negative effects the cap on interchange fees, some members of Congress think it is a good idea to expand the Durbin Amendment to credit cards.  The Credit Card Competition Act of 2023, S. 1838 and H.R. 3881,was introduced by Sens. Durbin, Peter Welch (D-Vt.), Roger Marshall (R-Kan.), and J.D. Vance (R-Ohio) in the Senate, and Reps. Lance Gooden (R-Texas), Thomas Tiffany (R-Wisc.), Jeff Van Drew (R-N.J.), Max Miller (R-Ohio), and Zoe Lofgren (D-Calif.) in the House of Representatives.  While supporters of this legislation are making similar claims of lower fees and increased competition, the end result will be the same as the Durbin Amendment.  Any savings gained will likely be retained by retailers and not passed on to customers, and consumers will lose beneficial credit card rewards. 

Sens. Durbin and Marshall are taking this effort beyond their legislation to ask federal agencies to impose regulations.  In their October 30, 2023, letter, the senators asked the Department of Transportation and the Consumer Financial Protection Bureau how they plan to protect customers from the “deceitful marketing tactics” that are used to advertise travel rewards and other loyalty programs offered by credit card companies.  The senators claim that the airlines are “engaged in unfair, abusive, and deceptive practices with respect to these loyalty programs.”  The letter is a backdoor attempt to achieve through regulation what the members of Congress are not likely to achieve through legislation, since the bill has not yet been the subject of any hearings.

It is clear that the supporters of the Credit Card Competition Act of 2023 do not have the best interest of consumers at heart.  Instead, their goal is further government intervention in a thriving and popular market.  If the Credit Card Competition Act is signed into law, it will inevitably lead to a repeat of what happened following implementation of the original Durbin Amendment and consumers will lose their credit card rewards. 

The Federal Reserve estimates that 84 percent of Americans have a credit card with a rewards program.  Despite claims to the contrary, travel and other loyalty rewards are extremely popular, and consumers use these rewards for a variety of purposes, including paying for essential items like groceries and gas, and to pay for family vacations or holiday travel.  

If the Credit Card Competition Act is enacted into law, it would be a disaster for consumers.  Despite harm to consumers from the cap on interchange fees, supporters of the legislation are doubling down on harmful policies and pushing for increased regulations to achieve their goals.  Lawmakers who support free market principles should reject this bill and the effort to increase regulation in a competitive and innovative financial market.