Credit Card Competition Act has security risks

These days as technology gets more advanced, it seems like consumers are under constant attack from hackers and online scammers. Now more than ever, consumer safety and protection are of the utmost importance, which is why I need to sound the alarm on a bill that could compromise our safety. First introduced in 2022, the Credit Card Competition Act (CCCA) would hurt consumers just so some of the largest corporations in the world can pad their bottom line.

Thankfully, CCCA did not go anywhere last year because both Republicans and Democrats could clearly see the harm it would do. Unfortunately, the sponsors reintroduced the legislation June 7. This policy is a bad idea and must be stopped.

The way CCCA works is that it would force credit card issuers to add extra unaffiliated payment networks to their credit cards through a “routing mandate.” This would open up our credit cards to alternative, cheaper payment networks that have lower fees and weaker security protections.

Massive retail stores love this bill because they would add a fortune in new revenue, since they would have the option of choosing cheaper payment networks and see lower interchange rates. However, these networks are often cheaper because they skimp on things like rewards and security. If merchants are able to route transactions over a cheaper, alternative network with less robust security features, that would put consumers, merchants and financial institutions at risk.

A credit card routing mandate would also gut the interchange fee system that funds credit monitoring, fraud detection and fraudulent purchase protection. The interchange network system protects consumers and businesses from fraudulent debit and credit card transactions, so we are not held liable when someone tries to steal our credit card information. Without these funds, the cost of fraud gets placed on consumers.

Consumers would also say goodbye to rewards programs as we know them, since these are also funded via the interchange system. This means that cash-back, hotel points, airline miles and other programs tourists use to visit Nevada, which are funded through interchange fees, would either be significantly reduced or eliminated altogether. The availability of credit cards without annual fees would greatly diminish and millions of Americans could lose access to credit altogether. The CCCA would cost consumers $50 billion per year in lost rewards programs.

Proponents of the CCCA argue that the bill lowers prices for retailers so that consumers can benefit through lower prices. Yet we already know this won’t happen. After a similar debit card policy passed in 2010, big box stores saved over $100 billion, and consumers ended up worse off than before. University of Chicago researchers at the Coarse-Sander Institute for Law and Economics found that consumers bore the cost and lost rewards after the debit card regulations.

It is clear that the only ones who would benefit from the Credit Card Competition Act are giant retail corporations, while everyday Nevadans would lose the vital security features we need to safely make electronic payments, and rewards programs that encourage leisure travel and spending in our state.

Nevada’s delegation must say no to this policy.

Elaine Marzola is an attorney and member of the state Assembly, representing Nevada’s 21st District.