(Opinion) Call on policymakers to expand access to checking accounts, credit

Credit Card Competition Act 'double dips' into consumers' wallets, making access harder for most

An important part of getting folks participating in the economy is making sure they aren’t un- or underbanked. Fostering a more inclusive market will require policymakers to work toward expanding access to checking accounts and consumer credit. But if you’ve noticed that there are fewer free checking accounts lately, you aren’t imagining things.

About a decade ago, the Durbin Amendment passed, which changed how debit card transactions were allowed to be processed. By forcing card issuers to accept more routing networks on their card instead of their preferred secure networks, retailers saved on transaction fees, but the card issuers were forced to offset the smaller fees from networks by putting them on consumers.

As a result, the Credit Card Competition Act (CCCA) proposes we create a similar mandate around credit cards. The CCCA is a double dip into the average American’s wallet — not only will credit card rewards and consumer credit become harder to access, especially for underserved communities, but we know based on experience that big box retailers do not pass those savings on to shoppers.

When the Durbin Amendment passed, the results were disastrous for consumers. A 2017 Federal Reserve study found a 35% drop in free checking accounts at large banks and 15% at smaller banks, contributing to indirect consumer losses of $22 billion to $25 billion, according to a University of Chicago report.

Out of all Americans, marginalized communities felt these losses the hardest. The CCCA will only worsen access to consumer credit, especially in low-income areas, and remove an important building block to eventually access larger loans and mortgages. For those who are able to keep their credit cards, points and rewards will become less valuable. Interchange fees go a long way to offset these costs that provide benefits to consumers.

Less interchange fee revenue also means less protection against fraud for consumers. Card issuers continually invest in cybersecurity to ensure that payment systems are safe from fraud. A race to the bottom on interchange fees means networks will be included in the market that cut corners on security, causing strain for banks investigating fraudulent purchases and, more importantly, cardholders that have these fraudulent purchases made on their card.

So what do we get in exchange for these lower interchange fees? We know that after the Durbin Amendment, retailers sat on that extra money as increased profit and did not pass the savings onto consumers. Big box retailers raked in an extra $109 billion and yet a 2014 Federal Reserve of Richmond study found that 98.8% of those big box retailers kept their prices the same or increased prices.

In Manchester, these problems will even cascade out to Manchester Airport and our tourism industry. Many airlines make a profit on selling points to credit card issuers and cutting these rewards will only serve to increase ticket prices as airlines try to make up for that loss. And with nearly 80% of vacationers in 2019 reporting they planned to use a credit card to fund their trip, increased ticket prices and more credit card fees are a recipe for fewer visitors.

The Durbin rule caused banks to pass losses onto consumers and allowed big box retailers like Amazon and Walmart to keep increased profits. The CCCA would simply allow this to happen again at a massive scale. This legislation would worsen or fully take away access to consumer credit for many communities and stand to double dip into the wallets of the customers that remain. Granite Staters should stand strong in opposing the CCCA.

State Senator Lou D’Allesandro represents District 20 for Manchester Wards 2, 3, 4, 10, 11 and 12.