Payments & Fintech Law
The Credit Card Competition Act
Preparing for Swipe Fee Compliance Changes
The Credit Card Competition Act
The Credit Card Competition Act (CCCA) stands at the forefront of proposed legal changes that could significantly reshape the US payments industry landscape in 2024 and beyond.
Senators Roger Marshall and Dick Durbin have reintroduced the CCCA to address their long-standing concerns over fees that merchants and consumers pay each time they swipe a card for payment.
Here we’ll briefly discuss:
- What the Credit Card Competition Act would do
- What supporters and opponents say about the CCCA
- Legal and compliance issues to navigate if the CCCA becomes law
What is the Credit Card Competition Act?
The Credit Card Competition Act is a bill in Congress that aims to curtail credit card interchange fees, also known as swipe fees. The legislation would put in place a mandate that would require large banks that issue credit cards (those with assets exceeding $100 billion) to offer merchants a choice between at least two unaffiliated payment networks.
What Do CCCA Supporters Say?
The bill’s authors say the act would bring competition to the process of selecting payment networks, thereby diluting the dominance of major networks over transaction fees.
They believe that by having the option to choose a network with lower fees, merchants could see significant savings that could then be passed on to consumers in the form of lower prices.
Supporters also argue the CCCA could open the door for new market entrants, encouraging innovation and enhanced payment security.
What Do CCCA Opponents Say?
Meanwhile, opponents say that regulations mandated by the federal government through the CCCA would drive up prices for smaller banks and credit unions while providing little benefit to small businesses.
They cite the 2010 Durbin Amendment that placed regulations on debit card transactions, saying it resulted in higher bank costs and cutbacks in services.
They also contend the CCCA could undermine credit card rewards programs and possibly lead to less innovation in the payments space.
Implications for the Payments Industry
Regardless of these arguments, the Credit Card Competition Act would represent a pivotal shift within the payments industry if it becomes law.
Legal Changes & Compliance Issues
If the CCCA is approved, payment processors and card issuers would be thrust into a new regulatory environment necessitating substantial adjustments. The following are several of the primary legal changes and compliance issues that would likely emerge:
1. Network Neutrality
Payment processors would need to ensure that their systems are neutral and capable of supporting transactions across multiple networks, not favoring one over another. This could require significant technical and operational overhauls to reach compliance with the mandated neutrality.
2. Enhanced Disclosure
Legal requirements surrounding fee disclosure and available network options to merchants could become more stringent. Payment processors may need to create new pricing models and clearly explain them to merchants, making sure they understand their choices.
3. Compliance Infrastructure
The act would create the need to add or expand compliance departments within payment processing firms to monitor adherence to the new rules. Actions could include training staff on the CCCA’s complexities, revamping internal policies, and ensuring compliance through regular audits and assessments.
4. Merchant Agreements
Existing agreements with merchants would likely require revision to align with CCCA stipulations. Payment processors would need to navigate these changes carefully to maintain merchant relationships while ensuring legal compliance.
5. Antitrust Considerations
The CCCA’s emphasis on competition could also heighten antitrust scrutiny within the payments industry. Payment processors would need to be vigilant in their business practices to avoid actions that could be perceived as stifling competition under the new regulatory framework.
Navigating the Future
The road ahead for the payments industry in the wake of the CCCA’s potential enactment is fraught with challenges and opportunities.
Adapting to the new legal landscape would require a proactive approach — anticipating regulatory shifts, investing in compliance infrastructure, and fostering innovation within a new environment.
Take the Opportunity
Navigating the CCCA or other transitions on the horizon requires agility, foresight, and a commitment to compliance.
We’re here to help you manage transitions like these effectively.
Learn how our deep expertise in the payments space can position you at the forefront of any new landscape that’s in front of you.
Ready for a Conversation?
If you have any questions about compliance, the CCCA, or another important business situation, talk with one of our payments and FinTech attorneys.
We have the deep experience to help you protect and grow your company. We’re here whenever you’re ready to schedule a consultation.
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