(Opinion) Call for Congress to prioritize banking, credit services availability

Credit Card Competition Act impacts banking and credit services for people of color, low-income communities

Access to banking and credit services is a necessity for all of us in the Granite State. These financial services are the key to planning for the future, buying a house, starting a small business and paying for college. Everyone in New Hampshire should have those opportunities

Unfortunately, people of color, rural communities and low-income areas are disproportionately impacted by a lack of banking and credit access. When compared to the rest of the country, the Consumer Finance Bureau reports that rural Americans are more likely to live in banking deserts, or areas without any banking branches in the vicinity. In communities of color, the Brookings Institute reported in 2021 that one-third of Hispanic Americans and almost one half of Black Americans are either underbanked or have no bank account at all.

Congress should put improving credit and banking access in marginalized communities at the top of their agenda. However, bills like the Credit Card Competition Act (CCCA) would make things worse. This bill was introduced in 2022 to regulate interchange fees, which are the fees credit card companies charge merchants to process credit card transactions to cover operational costs and consumer security features. The bill failed in 2022, but the sponsors of this legislation are trying to attach the CCCA to the National Defense Authorization Act — a place it does not belong.

The Credit Card Competition Act would use a routing mandate to force banks to include multiple network options for transactions, rather than utilizing their preferred secure network option. This would create a race to the bottom as payment networks rush to lower their fees to compete with cheaper networks, draining interchange revenue. Banks of all sizes will lose billions, even the small ones that are supposedly “exempt” from the policy. A 2017 study by the Federal Reserve found that the negative consequences of routing mandates generate an industry-wide impact felt by both regulated and exempt financial institutions.

After the Durbin Amendment passed and banks lost billions, they passed the losses onto consumers. A Government Accountability Office study found that free checking declined at big and small banks, monthly fees on noninterest checking accounts increased by 20% on average, and minimum balances to avoid fees increased by 50% for these accounts. All in all, a 2014 study from George Mason University reported that the Durbin Amendment increased the unbanked population by one million Americans, primarily in marginalized communities.

The Latino Coalition found that making these changes to credit card routing and interchange fees would bring about higher credit card costs and lower benefits by eliminating rewards programs, increasing interest rates, and adding new and higher credit card fees. Members of our community with lower credit scores or who already struggle to access credit would get kicked out of the system, as many as 7 million Latinos and 8 million African Americans, according to one estimate.

If this policy is extended to credit cards, Morning Consult economists reported that it would cause huge annual revenue losses to banks of all sizes, including $5 to $10 billion in annual losses for community banks and local credit unions. Banks will make up the massive revenue loss by cutting rewards programs, raising interest rates, and adding and/or raising card fees. This will trigger an estimated $40 to $50 billion in consumer losses and make credit harder to access.

I hope New Hampshire’s delegation in Washington will reject the Credit Card Competition Act. We need policies that expand banking and credit access for marginalized communities, instead of ones that create more barriers.

Manny Espitia is a former NH state representative, and previously served as president of the NH Young Democrats. He lives in Nashua.