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With summer holidays around the corner, millions of Americans are getting ready for cash in their own Hard-Arjit Credit Card Award: Points, miles and cash back they have gathered throughout the year to help flying on gas pumps, staying in hotels and covering rising costs. I would know, as I am one of them.
But what if those awards suddenly disappeared overnight?
It is not an imaginary. This is an imminent result of a growing political movement-flying under the national radar-to regulate these to regulate how credit card transactions work through a wave of state-level price control laws.
There is a growing political movement to regulate how credit card transactions work through a wave of state-level price control laws. ( / istock)
You read the right: State legalists are coordinating a backdoor campaign for a Cap Interchange fee, also known as “swipe fees”. Credit card network Every time you use your card, you collect from retailers. They say that they are doing so to help small businesses. But real results will be disastrous: the collapse of prize programs, high banking fees and low financial equipment for families already struggling with inflation.
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This reminds all of the Durbin Amendment, part of the 2010 Dod-Frank Act. That federal law faced fees on debit card transactions. What happened? Banks reduced debit rewards programs, increased account maintenance fees and abolished free checking for millions of Americans. The study of Richmond and Atlanta Federal Reserve found that almost all retail vendors kept the savings in the pocket. Ninety -nine percentage did not pass him to consumers. Sound familiar?
More than a dozen states and politicians in Washington, DC, want to do the same thing for their credit cards. Bill has already been advanced in Arizona, New Mexico, New York and ColoradoWith more on the way. These measures will limit how banks and cards apply the issuer fee, especially on parts of a transaction that include sales tax or tips, effectively kneel the revenue that funds the credit card awards. New York Fed said that 86% of interchange fee income directly funds these programs. Cut that funding, and they will disappear.
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And don’t think that it will be just miles and risk. There are other implications and results. Banks and credit unions, especially small, regional, will be forced to compensate for lost revenue. This means that high monthly account fee, reduced access to credit, and hard loan standards for working families and small business owners.
This is not just bad economics. This is a bad rule. This state law is the amount of a shadow regulatory regime that implements widespread value control on a nationwide financial system that the federal government already controls. It raises severe constitutional questions:
Do these laws violate the commerce segment? Does it constitute the regulation of interstate commerce? Are Swipe fee price control illegal interstate compacts that require Congress’s approval?
These laws will force banks and credit unions, especially small, regional people, to compensate for lost revenue. ( / istock)
We are already watching Illinois plays chaosMPs passed the Interchange Fee Prohibition Act (IFPA) in 2023, and now the state is tied in a federal trial. A judge has already issued an initial prohibitory orders exempting banks outside the state, while Illinois Bank and Credit Union are trapped under a conflicting rule book.
The plaintiffs, including the American Bankers Association and the Credit Unions of the US, are warning that the entire payment ecosystem from traders to processors can break under pressure from this legal dirt. Sound policy? barely.
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Colorado corresponds to its version of this failed idea: HB25–1282, so-called “Swipe duty fairness and Consumer Protection Act.” Do not let the name be foolish. This bill is anything, but fair, and it will protect nothing. It is a regulator nightmare that has been designed as consumer protection, and it is likely to incite the cases that the taxpayers will eventually fund.
In Colorado, politicians are weighing the “swipe duty fair and Consumer Security Act”. (Getty image through Lindsay Nicholson/UCG/Universal Image Group)
So why are these laws growing so fast? Simple: This is a political theater. Politicians want to claim that they are “broken” Credit card companiesBut in the end, it is a consumer who is punished. The awards disappear. The fee increases. Access to shrink credit. And hardworking families lose the equipment on which they trust to increase their budget.
If there is no step in the Congress, this patchwork of state laws can highlight the financial infrastructure that supports $ 9 trillion in the annual credit card purchase. Travel to the grocery store, filling your tank, buying school supply … every swipe will cost more, and distribute less.
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This is the time to ring alarm. It is not just about miles and digits; About Economic freedom and financial optionsThe US 50 state is better than a stealth campaign of price control by state capitals.
We have seen this film before. Let’s not look at it again.
