Baton Rouge Reporter

The head of the Louisiana Bankers Association (LBA) said proposed federal credit card regulations could hurt community banks and bank customers in Louisiana.

Her comments follow an analysis, released Jan. 8 by the Electronic Payments Coalition (EPC) and Oxford Economics Research (OER), that showed the so-called Credit Card Competition Act could lead to a loss of $227 billion in U.S. economic activity and 156,000 job losses.

“If passed, this legislation could hurt all credit card issuers (including community banks) and their customers by allowing merchants to choose cheaper, less secure, card networks that would expose customers and their credit card data to weaker cybersecurity protections and increased fraud vulnerabilities,“ Ginger Laurent, CEO of the LBA, told Baton Rouge Reporter. “Merchants receive great benefits from the current payments system, including increased sales, faster transactions, reduced costs of cash, new retail channels, and prompt, guaranteed payments.“

While Laurent said she hadn’t seen the study and could not comment on it, she said the bill would shift “merchants’ legitimate costs of doing business from the merchants to financial services providers.” 

“Based on past experience with government imposed restrictions on debit card interchange, this legislation would likely cause consumers to see reduced card rewards (i.e. cash back payments, frequent flyer miles and other perks), reduced free checking opportunities, and higher fees,” said Laurent.

Originally sponsored by U.S. Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kans.) in 2023, the legislation would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions. Opponents to the bill argue that if given the choice, retailers would likely choose cheaper, less secure networks for processing transactions, thereby exposing consumers to increased securities and fraud risks.  

The legislation has not, as yet, been re-introduced in the current Congress.

The bill could result in a $227 billion loss in economic output over approximately four years, driven by a 100 basis point reduction in interchange and an $80 billion decline in discretionary spending, according to the OER study, with regions reliant on travel and recreation spending projected to experience the greatest economic impact from the proposed policy.

OER is a global advisory firm that provides economic forecasting and analysis. The company was founded in 1981 as a commercial venture with Oxford University’s business college. It offers research on economic trends, policy, and industry performance for governments, businesses, and financial institutions. The firm operates offices in various regions, including North America, Europe, and Asia. Oxford Economics produces reports and data covering global and regional economies, industries, and markets.

The EPC is a trade association that represents credit unions, community banks, and payment card networks. The coalition advocates for policies that protect and promote the use of electronic payments. 

Established in 1900, the LBA represents banks and financial institutions operating in Louisiana. The organization provides advocacy, education, and resources to its members, working with state and federal policymakers to address issues affecting the banking industry. Its headquarters are located in Baton Rouge, Louisiana. The association’s membership includes community banks, regional banks, and national banks with operations in the state.