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ICBA Asks Congress to Oppose Measure Placing Price Controls on Credit Cards

Measure Claiming to Help Actually Hurts Consumers by Limiting Competition

Washington, D.C. (May 15, 2008)—The Independent Community Bankers of America (ICBA) asked Congress to oppose the Credit Card Fair Fee Act of 2008 (H.R.5546) because the bill — while purporting to help consumers — would place price controls on bank-to-bank interchange fees and create a new government bureaucracy consisting of a three-judge tribunal to set rates on the fees.

"This measure will upend the very payment system that supports consumers' ability to use a credit card in a convenient and secure way, and that merchants have come to depend on for much of their business," said Camden Fine, ICBA president and CEO. "The current interchange system allows community banks to aggressively compete on equal footing and offer card products and services, bundled with the type of long-term relationship-building services unique to the community bank business model."

"Should the government start artificially depressing interchange rates, many community bankers — which already operate at tight margins — will be further squeezed," Fine said. "To put this in perspective, what leverage would a $100 million community bank that wants to offer small business card products have in a competition against large banks some of which have assets of well over one trillion dollars?"

The existing interchange system addresses this disparity and allows community banks to compete aggressively with the big issuers, giving consumers and entrepreneurs more choices and lower rates and fees. The current system empowers thousands of community banks to offer card products to consumers and small businesses, gives those consumers the ability to shop at more than 24 million card-accepting locations worldwide and has been empirically shown to boost sales volume and revenue for retailers of all sizes who choose to accept plastic.

"No one wins when there are fewer choices and less competition, including consumers and small businesses that can often find a better deal with their local community banker," Fine said.