The Credit Card Competition Act (CCCA) is Bad for Consumers

With inflation hitting all-time highs and consumers struggling to afford the basics like rent and groceries, it is encouraging to see that some members of Congress are putting us at the top of their agendas. Congress recently passed the Inflation Reduction Act, just one of the policies coming out of Washington that gives our communities a much-needed boost especially our most marginalized.

Unfortunately, not everyone has consumers’ best interests at heart. Over a decade ago, Congress passed an amendment that added regulations to our debit cards that hurt consumers. Now, members of Congress are considering passing the Credit Card Competition Act of 2022 (CCCA) and putting the same regulation on our credit cards.

Here is how it works: the original debit card amendment aimed to cut down on interchange fees, which are the fees that retailers pay to process electronic payments so that retailers could save money. Congress did this by imposing a routing mandate, which forced banks to allow additional “unaffiliated” networks to work on their debit cards and flooded the market with cheaper, often less secure payment networks.

This influx of cheaper payment processing networks created a race to the bottom as payment networks across the board lowered their rates to stay competitive, taking billions out of our electronic payment system and saving big box stores like Walmart and Target a fortune. Banks then tried to make up their losses at our expense, reducing free checking, and increasing fees and minimum account balances. Although well-intentioned minorities were impacted the most they relied on the low-cost to free services banks offered.

Congress is now looking to extend this routing mandate to credit cards through CCCA, but we know what this will mean based on history. Consumers are the ones that are hurt the most. Big box stores did gain an extra $90 billion in profits after the original debit regulations passed, but they did not use this to lower prices for consumers as what was expected from Congress.

CCCA will take credit access from struggling consumers. After the original debit regulations, banks made financial services more expensive and less accessible to cut costs, and the same thing will happen with credit cards. They will also look to reduce their own liabilities by raising credit standards, interest rates, and fees, making credit harder to get for people who are low-income or have a low credit score. 2021 economists estimated this could take credit access from 10 to 15 million people, mainly in financially marginalized communities like mine. Access to credit for black and brown communities has historically been more difficult.

The Credit Card Competition Act is bad for consumers, and anyone who is concerned about consumers as we should be able to see that right away. With the loss of rewards programs and the cost of credit going up, consumers will basically be giving $40 to $50 billion a year to big box stores that do not need the money. Congress must reject CCCA and keep routing mandates where they belong: in the past.

Delvin Del Palacio is currently an Arizona State Representative from Legislative District (LD) 19 and a member of the Tolleson Union High School Governing Board.