ATR Releases Coalition Letter in Opposition to Rate Caps and the CCCA

Americans for Tax Reform released a coalition letter today to members of congress signed on by 24 conservative groups expressing their opposition to interest rate caps and the Credit Card Competition Act

The letter can be read here:

Dear Member of Congress,

We, the undersigned organizations, oppose efforts to impose price controls on credit cards. Whether through caps on interest rates or the inaccurately named Credit Card Competition Act (CCCA), these proposals would reduce consumer credit access, fail to address affordability concerns, and fragment an already dependable, well-functioning payments system.

Price controls harm consumers and have repeatedly failed to fix the very problem they attempt to solve. The most infamous example was in 1971 when President Nixon ordered a 90-day freeze on all wages and prices to curb spiraling inflation. This policy is memorable for

demonstrating how heavy-handed government intervention failed to curb inflation and lower prices.

Caps on interest rates have already been documented failures in states like Illinois. A study on the effects of Illinois’ 36% cap on consumer loans showed that 49% of low-income households reported that their financial well-being had declined. A 10% interest rate cap on consumer credit will reduce credit access. Interest rates reflect borrower risk for the lender – people with higher credit scores and reliable payment histories enjoy lower interest rates than those with lower credit scores. A 10% cap would effectively

limit credit access to only people with high credit scores and extensive borrower histories. The impact of rate caps cannot be overstated. The Electronic Payments Coalition found that a 10% cap could eliminate credit card access for up to 190 million Americans, or close to 90% of American cardholders.

The same logic applies to interchange fees. The original Durbin Amendment failed to deliver its promise of lowering prices. A 2015 study by the Richmond Fed found that nearly 99% of merchants either increased or maintained prices following the Durbin Amendment’s enactment. Research also found that if the original Durbin amendment had not

been enacted, 65% of checking accounts offered by banks would be free today. The report also found that minimum account balances on checking accounts to avoid monthly fees skyrocketed by 50% as a direct consequence of the Durbin Amendment. That record undermines proponents’ claims that increased government intervention in the marketplace will deliver savings to consumers.

The CCCA would apply this disastrous approach to credit card interchange fees through a routing mandate. It would direct the Federal Reserve to require that credit cards enable dual routing over two networks, including one that is neither Visa nor Mastercard. The fundamental premise of the CCCA is inherently wrong. The credit card market is already extremely competitive. One analysis found that “the net profit per dollar of purchases for the transaction part of the credit card network is negative, -0.5 cents per dollar.”

Credit networks are integrated systems that combine fraud prevention tools, authorization standards, and dispute resolution mechanisms. More routing paths mean more operational points of potential failure and a more complicated checkout experience for consumers.

Interest rate cap proposals and the CCCA promise affordability through price controls when in reality they reduce credit access, increase prices elsewhere, and fail to control costs.

We commend members of Congress for their previous votes against the CCCA. We encourage all members to remain steadfast in their opposition against government overreach via interest rate cap proposals and the CCCA.

Sincerely,

Grover Norquist 

President 

Americans for Tax Reform

Brent Gardner

Chief Government Affairs Officer

Americans for Prosperity

Philip Kerpen 

President

American Commitment

Leah Locke

Finance and Insurance Policy

American Consumer Institute

Ryan Ellis

President

Center for a Free Economy

David Guenthner

Executive Director

Mackinac Center for Public Policy

David Williams

President

Taxpayers Protection Alliance

Carrie Lukas

President

Independent Women’s Forum

Caroline Melear

Fellow

R Street Institute 

Eric Ventimiglia

Executive Director

Pinpoint Policy Institute

Brandon Arnold

Executive Vice President

National Taxpayers Union

Lisa Nelson

CEO

ALEC Action

Jonathan Small

President 

Oklahoma Council of Public Affairs

Chris Cargill

President &CEO

Mountain States Policy Center

John Berlau

Director of Finance Policy

Competitive Enterprise Institute

Dr. Robert McClure

President & CEO

James Madison Institute

Brian Balfour

Senior VP of Research

John Locke Foundation

Caleb Brown

CEO

Bluegrass Institute

Brian Garst

Vice President

Center for Freedom & Prosperity

Daniel Erspamer

CEO

Pelican Institute for Public Policy

Paul Gessing

President

Rio Grande Foundation

Jon Caldara

President

Independence Institute

Robert Alt

President

Buckeye Institute

Tim Chapman

President

Advancing American Freedom

Vance Ginn

Chief Economist 

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Lorenzo Montanari

Executive Director

Property Rights Alliance

Karen Kerrigan

President

Small Business & Entrepreneurship Council