Tourism in Montana continues to grow in importance to Montana’s economy. The sector supports about 50,000 jobs statewide, and visitors to Montana spend nearly $5.5 billion annually. The industry overall contributes over $400 million in tax revenue to Montana communities.
All indications are tourism in Montana will continue to grow in the coming years—providing more opportunities for new jobs and increased economic output.
But that opportunity could be stifled if Congress decides to pass new banking regulations that would result in banks restricting popular credit card rewards and miles programs.
Millions of Americans use rewards and miles to pay for some or all of their vacation budget. In a recent survey, 76% of rewards or miles program participants said they would have to “significantly change their travel habits without these benefits.”
The legislation at question is the so-called Credit Card Competition Act, or CCCA. Proponents of the CCCA, led by Senators Dick Durbin and Roger Marshall, want credit cards to be treated more like debit cards with lower “interchange fees”—the fees merchants pay to accept electronic transactions.
Interchange fees pay for the network infrastructure for electronic payments, as well as for fraud prevention and loss. Under the CCCA, banks will face new caps on credit card interchange fees. To make up the difference they’ll have to institute new fees on other banking products, reduce the availability of credit, and reduce services—including their rewards and miles programs.
These restrictions would have a direct effect on the tourism industry as Americans curtail their vacation travel.
Using history as a guide we can project just how bad the impacts of the CCCA would be. Back in 2010, Senator Durbin pushed legislation to cap interchange fees on debit cards. The result was a shift in the services banks could offer and higher costs on bank customers. Products like no-fee checking and rewards-bearing debit cards were largely eliminated. The hoped-for reduction in prices never materialized and research shows that these 2010 banking regulations resulted in big-box retailers keeping the savings for themselves.
It’s estimated that Senator Durbin’s 2010 legislation increased the country’s unbanked population by a million people, with low-income and rural communities hit the hardest. The CCCA would have a similar impact with access to credit cards being increasingly restricted to those with less than stellar credit.
Small business owners in Montana don’t just accept credit cards; we are significant users of them ourselves. Many of us rely on rewards like cash back and travel points to help cover expenses, or for essential funding when starting out. One study found that the CCCA would cost small businesses $1 billion in lost rewards.
Moreover, the legislation would also significantly reduce access to credit for new entrepreneurs and lower-income consumers, as banks are forced to make cuts due to lost revenue. Given what happened after Senator Durbin’s 2010 legislation, we also anticipate a major negative impact on the rural and community banks that are the lifeblood of our local economy.
Congress should heed the lessons of history. The Durbin Amendment failed to deliver its promises and harmed consumers. The CCCA would simply repeat the mistake, benefiting giant retailers while costing the rest of us. Montana’s small businesses need solutions that foster growth and security, not mandates that threaten our financial services, jeopardize our data, and enrich big-box stores at our expense. Congress needs to abandon this misguided effort and focus on policies that truly support Main Street.
Mike Cuffe is a Republican state senator from Eureka.