Credit Card Competition Act of 2022 has potential for negative impacts on consumers and tourism industry
Tourism is our lifeblood and largest industry in Eagle County and is one of Colorado’s largest industries. It creates jobs, pumps tax revenue into the state, and supports our economy. Even amid the COVID pandemic, in 2021, 84.2 million people visited our state and collectively spent $21.1 billion here.
To protect and grow our tourism economy, we must incentivize travelers to visit our state. 35% of Americans have credit cards that earn travel rewards, and many use them to visit Colorado. According to a Forbes Advisor survey, 25% of Americans who plan to travel in 2022 plan to pay for their entire trip with rewards points from credit cards or earned miles.
Recognizing tourism’s key role in our economy, Colorado’s leaders in Congress and across the state should do everything they can to support our businesses and locals that rely on tourism. However, some are considering proposals that would reduce rewards programs and get rid of major incentives to travel. Cutting back on the rewards programs that travelers use to stay in hotels and ski lodges and book flights could jeopardize all of us earning our living in the tourism industry.
I am talking about the Credit Card Competition Act of 2022: a bill that will expand the regulations of the 2010 Durbin Amendment. This last-minute amendment set federal price caps on debit interchange fees, which merchants pay to process debit cards, and mandated routing requirements for banks. The routing mandates forced banks offering debit cards to add extra, unaffiliated payment networks to their cards, instead of just the networks they trust to process sensitive data. This resulted in payment networks lowering their interchange fee rates to stay competitive with the all the cheaper, often less secure, networks, and interchange fee rates became a race to the bottom. Banks lost billions and passed those losses onto consumers.
The regulations were supposed to save money for consumers, but they did not live up to their promises. Big retailers like Walmart and Target did make almost $100 billion in extra revenue, yet the Federal Reserve Bank of Richmond found that nearly all retailers raised prices or kept them the same after the Durbin Amendment.
These same big retailers now want to pass the Credit Card Competition Act to extend routing mandates to credit cards. Once again, banks will lose billions and recoup their losses at our expense. The bill sponsors claim that they exempt small banks from the routing mandates, but banks of all sizes will feel the impact of lower interchange revenues. They will likely slash rewards like mileage programs and hotel points. We’ve seen it before, and there is nothing to suggest it will be any different this time.
Just a few years ago, Australia’s Federal Reserve Bank implemented similar Durbin Amendment policies (a cap on credit card interchange fees) and as a result, virtually all free credit cards in Australia disappeared and consumers saw higher fees and diminished rewards programs. The value of rewards programs plummeted by 25 percent across the country. While credit card routing mandates and credit card interchange fee caps—like the ones in Australia—may seem like very different policies, the result is the same: large banks will lose billions from higher credit card processing costs and pass those losses onto consumers and travelers.
Our tourism industry has already taken a big enough hit from the pandemic, and our local banks can’t afford credit card routing mandates. Congress must consider how negatively expanding routing mandates to credit cards will impact the Colorado tourism industry, and we must urge our representatives not to pass these regulations.
Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com