"The history of these policies demonstrate that consumers will not see a penny of these savings." (Getty Images"
After the August recess, Congress has a long list of bills to pass, and work to get done before the winter holidays. Unfortunately, some of the largest corporations in the world are busy lobbying for the Credit Card Competition Act, a bill that will line their pockets while hurting Nevadans. As a state senator, I have fought to protect consumers and expand our economy, and I want to urge our Congressional delegation to do the same by opposing this bill.
The Credit Card Competition Act has a long, troubled history. Essentially, this legislation would put in place regulations on banks that issue credit cards so that big retailers can save money on credit card processing “swipe” fees. These corporations have claimed that by capping these fees that fund the credit card, or interchange, system consumers will benefit, but the history of these policies demonstrate that consumers will not see a penny of these savings.
When a similar policy was applied to debit cards in 2010 under what was called the Durbin Amendment, a Richmond Federal Reserve study observed that almost all retailers kept their prices the same or raised their prices for consumers. The result, the Richmond Federal Reserve found, was that large retailers essentially pocketed over $100 billion, while small businesses got nothing, and consumers lost wealth.
And that is my biggest concern here: how this will impact Nevada families.
After the Durbin Amendment passed, banks saw huge losses in debit card interchange revenue, which caused them to raise fees, raise account minimum balances, and eliminate free checking. The University of Chicago found that consumers lost between $22 and $25 billion because of this, and George Mason University found that one million Americans became unbanked because it became too expensive.
This time, when banks suddenly see their credit card interchange fee revenue drop, they will try to make up for those losses by cutting rewards programs, raising fees, interest rates, and credit standards. This is going to transfer an estimated $40 to $50 billion from consumers to big box stores every year and make lending even tighter. Of course, the Nevadans who will be most impacted are those who are already financially marginalized, especially APIA, Latino, and Black communities.
What makes this even worse for Nevada families and businesses are the spillover effects to our tourism based economy. Cutbacks to rewards programs are going to make it more expensive for people to visit Nevada, and jeopardize a huge part of our economy.
A prime example of the effect this will have is on the cost of plane tickets to Nevada. Most airlines do not actually make profits flying planes, and instead earn profits by selling frequent flier miles to banks for credit card rewards programs. This helps subsidize plane tickets and keeps the cost down for travelers. But, without this revenue stream, airlines will raise the price of tickets for everyone and, to add insult to injury, millions of Americans will lose their airline miles they have been using to travel.
As we all know, tourism is the lifeblood of Nevada. It generates almost $100 billion to our state a year and employs nearly 400,000 Nevadans. The Credit Card Competition Act directly threatens this and is a bad deal for Nevada consumers, Nevada families, and Nevada’s economy.
Nevada’s leaders in Washington should work to shut this bill down.
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