Glenn Grossman, the director of research at financial advisory firm Cornerstone Advisors, said the pending federal “Credit Card Competition Act of 2023” (CCCA) could lead to an increase in credit card fraud.
“If the CCCA were to be approved the routing of credit card transactions would move from a ‘single pipe’ to ‘multiple pipes’ of data flowing from merchants to issuers,” Grossman told Federal Newswire. “Today, card issuers depend on the networks to profile and identify fraud.”
“They see all the transactions on their network and have developed fraud detection capabilities that would not be possible in a fragmented structure the CCCA would create,” Grossman said.
He said that Visa has invested billions on fraud detection.
“The investment builds trust and in return consumers use their credit cards,” said Grossman. “Zero liability means something to consumers.”
“With the CCCA, it is possible that promise is gone.”
In a report released in July 2023, "The True Impact of Interchange Regulation: How Government Price Controls Increase Consumer Costs and Reduce Security," Grossman wrote that studies show 79% of consumers choose credit cards as a payment option because of their data security.
The CCCA, S. 1838, would require banks to offer merchants at least two network options, one of which cannot be Visa or Mastercard, for processing credit card transactions.
The bill currently is sponsored by U.S. Sens. Dick Durbin (D-Ill.), Roger Marshall (R-Kan.), J.D. Vance (R-Ohio), Josh Hawley (R-Mo.), Peter Welch (D-Vt.), and Jack Reed (D-R.I.)
Grossman said that, under the legislation, credit card authorizations would be allowed to flow across many “pipes” which would eliminate much of the “fraud fighting value that Visa and MC have implemented.”
The bill would not require new networks to provide fraud detection, said Grossman.
“It is expected these new networks would rather just route data, not ensure the authorization is legitimate,” he said. “It is a fraudster’s dream come true!”
The Federal Trade Commission (FTC) reported receiving 114,348 complaints of fraud in which the payment method was credit card in 2023. Those fraud complaints accounted for $246.1 million.
The FTC also reported receiving 416,582 reports of credit card identity theft in 2023.
S. 1838 is currently pending in the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
