Durbin Is Retiring, Marshall Just Lost—Why The Bill Threatening Your Credit Card Rewards Isn’t Dead

Dick Durbin is retiring and Roger Marshall just lost his Senate seat. The two most prominent champions of the Credit Card Competition Act, the law intended to regulate credit card interchange which will mean far fewer rewards for consumers, will be gone in January. The bill threatening the economics of card rewards, and the airlines that depend on them, has support from President Trump and Vice President JD Vance was an original co-sponsor so it may come back with his presidential campaign. But the thing about this legislation is that it’s more useful as a way to raise campaign money from both retailers and banks than as something Congress actually passes. Departures of Durbin and Marshall haven’t made the Durbin-Marshall bill go away. Durbin identified Vermont Senator Peter Welch as his successor on the issue. The Airline Lobby Is Right To Worry In this week’s Airlines Confidential, Airlines for America CEO Chris Sununu warns that state initiatives interfering with card fees would eliminate points-funded travel. Banks buy miles because rewards help attract customers and their spending. By reducing margins on that spending, it’s less valuable to spend to encourage consumers to use the product. In markets where government has gotten involved in interchange rates we’ve seen: smaller initial bonuses higher annual fees annual caps on awards award chart devaluations (if each mile is worth less, an airline can still award one mile per dollar on spend despite receiving less money for it from the bank) It also means less revenue for the airline. In the third quarter, American Express represented all of Delta’s profit. American Airlines is barely breaking even even with several billion net from Citibank. We’d have much shakier airlines and fewer flights, and aspirational leisure destinations like Hawaii in particular would see less air service. What The Credit Card Competition Act Actually Does The current Senate bill, S. 3623, would require covered issuers with more than $100 billion in assets to enable at least two unaffiliated payment networks. At least one would have to be outside of Visa and Mastercard. Merchants get to choose the routing. That’s meant to put downward pressure on merchant payment costs by changing who controls which network handles the transaction. Cards issued in a three-party system, such as American Express issuing its own cards, are exempt from the routing requirement. Merchants benefit from accepting cards. They get more sales, and higher average sales. It’s often less expensive to accept credit cards than to take cash (due to employee theft, incorrect change, higher insurance costs). Retailers want the service cards offer, but want the government to force Visa and Mastercard to provide it for less. Trump’s promise of $1,200 in annual family savings was completely made up and inconsistent with the bill. Currently a majority of interchange gets rebated to the customer. Regulation of interchange has never lowered prices to consumers. And card payments, funded in large part by interchange, provide services to consumers beyond just payments (and borrowings). They often fund consumer protections – not just stronger dispute resolution than debit cards, but also extended warranty, return protection, and travel protections. The Bill’s Strongest Value Is As A Threat Back in July 2023, I argued that this was an especially useful issue for opening contribution wallets on both sides. Retailers have a large, concentrated interest in lowering their acceptance costs. Banks, payment networks and airlines have a large, concentrated interest in preserving the existing economics. An unresolved legislative threat gives both sides a reason to pour dollars into campaigns and political committees. I’d still bet on another round of proposals, threatened amendments and lobbying. Durbin and Marshall are leaving but the retailers and banks with billions at stake aren’t. Politicians still want the money. Topics on this page