Statement of the Electronic Payments Coalition on H.R. 2695

The Electronic Payments Coalition thanks the Judiciary Committee for the opportunity to present the facts in a hearing on H.R. 2695 – a bill that holds extraordinary potential for harming small financial institutions, competition in the debit, credit and charge card market, and ultimately the consumers served by this industry.

Small financial institutions will typically offer debit and credit card products to their customers at or below margin – as a loyalty building and customer service tool.  Should interchange revenue be forced down, as proposed in this bill, these community banks and credit unions will face an impossible decision of raising rates, eliminating rewards programs, or stopping their card programs altogether.  Customers of credit unions and community banks will have fewer choices with reduced competition in the market.

In Australia, where regulators forced down interchange rates below market value, this is precisely what happened.  Merchants saw hundreds of millions of dollars in increased revenue, with no evidence that consumers saw any savings at the register.  Moreover, consumers saw the return of annual fees on their cards, reduced or eliminated rewards programs, and a less competitive marketplace for debit and credit cards.

Merchants receive guaranteed payment, increased profits, and reduced expenses when they accept cards.  But they do not want to pay for these benefits, and are attempting to shift this business expense onto their customers.  We urge Congress to oppose H.R. 2695, a bill that will reduce competition, harm small financial institutions, consumers, and our economic recovery.