Palmetto State News

The head of the South Carolina Bankers Association (SCBA) said his organization is opposed to proposed credit card regulations pending in the U.S. Senate.

The bill, S. 1838, or the “Credit Card Competition Act” (CCCA, S. 1838), would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. Opponents to the bill argue that if given the choice, retailers would likely choose cheaper, less secure networks for processing transactions, thereby exposing consumers to increased securities and fraud risks.  

"There's negative impacts for the consumer, there's negative impacts for virtually every bank, and the only area that has a positive impact is the big box retailers," Fred L. Green, III, president and CEO of SCBA, told Palmetto State News. "It reduces their interchange and it increases the risk to consumers, increases the risk to banks, and increases the costs to the banks, which would offset some of the benefits that consumers get by using credit cards."

The original sponsors of S. 1838 are U.S. Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.)

Glenn Grossman, the director of research at financial advisory firm Cornerstone Advisors, said the pending federal “Credit Card Competition Act of 2023” (CCCA) could lead to an increase in credit card fraud, reported Palmetto State News on April 25.

“If the CCCA were to be approved the routing of credit card transactions would move from a ‘single pipe’ to ‘multiple pipes’ of data flowing from merchants to issuers,” said Grossman. “Today, card issuers depend on the networks to profile and identify fraud.”

“They see all the transactions on their network and have developed fraud detection capabilities that would not be possible in a fragmented structure the CCCA would create,” Grossman said. 

In addition to security issues, Green also said it the bill could impact credit card reward programs.

More than 172,000 travelers used credit card reward points to visit South Carolina in 2022, reported Palmetto State News earlier today. That's according to a report released by airline trade group Airlines for America (A4A).

The report said that 172,165 visitors used credit card reward points to visit the state in 2022, which supported 2,095 South Carolina jobs and had a total economic impact of $260.2 million.

Concerns over the impact of S. 1838 on credit card rewards prompted the heads of South Carolina's six largest airports to send a letter to South Carolina U.S. Sens. Lindsey Graham (R) and Tim Scott (R) in March.

"Representing the six commercial service airports in South Carolina, which support our state's travel and tourism economy, we urge you to oppose the Credit Card Competition Act of 2023 (CCCA)," wrote the airport executives. "ln our state, tourism is in an estimated $29 billion industry, supporting one in every 10 jobs and generating $1.8 billion in state and local taxes."

"lf signed into law, this bill would suppress travel and tourism by eliminating the foundation of credit card rewards and loyalty programs that countless visitors to South Carolina rely on for travel," said the letter.                                  

The bill applies to credit cards what a similar measure in 2010, often referred to as the “Durbin Amendment,” applied to debit cards. The 2010 measure was a requirement of the “Dodd–Frank Wall Street Reform and Consumer Protection Act.” 

A 2014 George Mason University study found that the 2010 “Durbin Amendment” led to a 50% reduction in the number of “fee-free” accounts offered by banks between 2009 and 2013, and doubled average monthly fees on “non-free” current bank accounts. 

The study also said the measure resulted in an increase of 1 million "unbanked" Americans in the year after the measure was enacted. 

"You know, I’m from the south, so I'll use the southern term, 'The dog bites me once. It's the dog's fault. It bites me twice. It's my fault," said Green. "And Durbin, this is his second attempt at a bite."

"The first one, the Durbin amendment passed, and again, on the promise that it would benefit consumers, there's been a significant amount of research done that the consumer received zero benefit and the big box retailers received significant benefits," said Green. "So this is just his second bite to try to get even more for the big box retailers."

Green said the SCBA has made the organization's opposition known to both Graham and Scott. 

"The response has been that they understand our position and firmly believe that they will oppose it when given the chance to," said Green. "Right now, I don't think it's in bill format as much as the thought that it might appear as an amendment to another bill."

He said that both Graham and Scott "were misled by the proponents" of S. 1838, "which again are the big box retailers," and said the U.S. Senators "were told by that lobbying group that the banks in my state, certainly those that are headquartered here, don't have an issue with it."

"So I not only corrected that misleading information, but use that as an opportunity to tell our senators, this is who you're dealing with, they'll tell you anything they want to tell you to get your vote, but it's not necessarily accurate," said Green.

The bill is currently pending in the U.S. Senate Committee on Banking, Housing, and Urban Affairs.