Progressive Policy Institute Outlines Harm of Proposed Credit Card Mandates

WASHINGTON, D.C. – Research from the Progressive Policy Institute (PPI) warns against two recent credit card proposals, the Durbin-Marshall routing mandates and a proposed 10% rate cap.

According to PPI, extending routing mandates to the credit card market would mirror the impact of similar debit regulations, which shifted costs onto small businesses and vulnerable communities while padding the profits of giant corporate mega-stores.

Additionally, PPI found proposed rate caps would limit access for most working-class and lower-income households. Many cardholders would also see higher fees, weakened protections, and would be forced out of regulated credit markets to predatory lenders.

Links to the reports are below, along with key findings from each:

The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees

• Majority of savings were NOT passed to consumers: One year after the debit cap took effect, only 1.2% of merchants passed savings to consumers, while 98% of retailers raised prices or kept them the same.
• Mom and Pop Shops lost out: Giant national retail chains were the primary beneficiaries of any savings, accounting for 73% of all purchases.
• No evidence of benefits: After a decade of data, the authors found “little evidence” of any consumer benefit, concluding that any theoretical savings for Americans were “unmeasurable.”
• Unintended consequences: The cap led to unanticipated increases in monthly bank maintenance fees and a sharp decline in the availability of free checking accounts.
• New barriers for the Unbanked: Higher fees created new barriers for lower-income households, undermining financial access and equity.

Cutting Credit: How Rate Caps Undermine Access for Working Americans

• Millions would lose access to credit: A 10% cap is far below prevailing market rates, meaning issuers would deny credit to most working-class and lower-income borrowers.
• Borrowers wouldn’t get lower rates, they’d get shut out: Instead of reducing costs, banks would cut approvals, slash credit limits, and tighten terms for higher-risk consumers.
• Costs would shift, not disappear: Issuers would offset the cap by raising fees, eliminating rewards, and reducing consumer protections for those who still qualify.
• Undermines consumer protections: Credit cards offer fraud protection, dispute resolution, and regulated terms–protections largely absent in high-cost alternative lending.
• Reduced access to regulated credit: Price caps in credit markets consistently reduce access and increase reliance on predatory lending, worsening outcomes for vulnerable households.

No Change Needed: Congress Should Rethink Extending the Durbin Amendment to Credit Card Interchange Fees

• Consumers paid billions instead: Research estimates the Durbin Amendment imposed $22-$25 billion in net losses on consumers, largely through higher banking fees.
• Free checking disappeared: Banks offset lost interchange revenue by raising account fees and reducing access to free checking, particularly harming lower-income households.
• Rewards programs were gutted: Within one year of Durbin’s implementation, 30% of debit issuers eliminated or reduced rewards, and most abandoned them permanently.
• International examples confirm the risk: Similar caps in Spain and Australia led to 40-50% increases in card fees and sharp declines in rewards value.
• Merchants kept the gains: Savings flowed primarily to large retailers, not consumers–mirroring outcomes seen in other fee-cap regimes.