American Airlines and Southwest Airlines this week voiced strong opposition to the Credit Card Competition Act of 2023 (S. 1838). The two industry leaders have raised concerns that the proposed legislation could significantly limit cardmembers' ability to earn travel rewards, thereby potentially disrupting key aspects of airline business models.
The Credit Card Competition Act of 2023 (S.1838) is designed to reduce "interchange fees" paid by retailers to credit card companies. These fees are typically used by credit card companies to fund customer service programs for their customers. The bill is sponsored by Senators Dick Durbin (D-Ill.), Roger Marshall (R-Kan.), Peter Welch (D-Vt.), and J.D. Vance (R-Ohio).
In October, the Electronic Payments Coalition (EPC) issued a statement highlighting 177 organizations that oppose credit card routing mandates included in S. 1838. American and Southwest Airlines were on the list, which includes worker unions, merchant and consumer groups, credit unions, community banks, and financial associations.
American told Federal Newswire that it "strongly opposes" the Credit Card Competition Act because it "would severely restrict the opportunity for cardmembers to earn and enjoy travel rewards and disrupt an integral part of airlines’ business models."
An American Airlines spokesperson said that nearly 30 million Americans hold an airline credit card and warned that the proposed bill "would destroy cardmembers’ ability to earn rewards, miles, and the myriad benefits that go along with co-branded programs."
Similarly, Southwest Airlines said in a statement to Federal Newswire that the legislation "is bad policy and would undermine, if not completely end, credit card rewards programs."
According to Southwest Airlines, its customers and employees use the company’s Southwest Rapid Rewards Credit Card to earn points redeemable for Southwest flights, car rentals, gift cards, and more.
A recent study from economist Stephen Moore, published by the Committee to Unleash Prosperity, was critical of the legislation. Despite the bill's aim to restrict credit card transaction fees, Moore argues that such limitations may not necessarily benefit consumers.
"Studies have shown that when fees are restricted by government regulations, about 70% of the savings go to the merchants, while consumers get little benefit at the cash register," Moore said.
