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Why Walmart and Target want the Fed to audit your credit cards

The following content is sponsored by the Electronic Payments Coalition.

It’s always a bit of a red flag when Walmart or Target say they’re doing something in the name of competition. That’s why the latest bill they’re pushing for is so concerning. The seemingly innocuous “Credit Card Competition Act” is anything but competitive. In reality, it’s a bait and switch. If passed, the bill would give the government greater power over the credit card payment system to help big box stores crush the credit unions and banks they currently rely on for securely process their customers’ purchases.

The proposed legislation will give new powers to the federal government, requiring the Board of Governors of the Federal Reserve to create new regulations on how consumers’ credit card payments are processed. This will allow retailers to ignore a customer’s preferred credit card network and process the payment on a cheaper, less secure network.

Walmart, Target and Amazon want this bill for several reasons.

First, they could pocket millions. Currently, retailers can choose which credit cards they accept. But if they accept a credit card, they have to process the card on that network. They can’t use a branded credit card and then secretly process the payment on an off-brand foreign network to save money. However, this bill will allow them to choose another network. Retailers will likely ignore a customer’s preferences and deal with them based on what is cheapest. This leaves the customer unprotected, but means retailers can pay lower interchange fees, adding more money to their bottom line.

Second, big box stores prefer not to pay for payment security. Currently, transaction interchange fees are paid to banks and credit unions to help fund anti-fraud programs. That’s why making a purchase with a credit card is so safe: Banks and credit unions work 24/7 to keep customers happy. Yet if this bill passes, credit unions and banks will lose a substantial source of revenue. They will have to cut back on security programs. The impact will also be felt in credit card rewards programs: there simply won’t be any money to fund them.

Government may have a role to play in cases of significant market failures, but that is not the case here. Payment security is stronger than ever, and financial institutions are constantly innovating to create faster, more secure ways to pay. Walmart and Target simply want to use their connections in government to write new laws that will benefit them. This sets a dangerous precedent for the Fed, which could control markets in favor of one sector over another. It’s also another sad example of big business’s ability to help craft laws that favor them.

This bill will hurt credit unions and banks. This will put consumers at greater risk of fraud, while also putting an end to credit card rewards programs. Mega-corporations like Target, Walmart, and Amazon have significant influence on Capitol Hill, so it’s important that your voice opposing this bill is heard.

Visit and let your elected officials know that you oppose this large-scale cash grab!


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