Payment network routing competition

Summary#

The bill directs the Federal Reserve Board (the Board) to write rules to stop card issuers and card networks from forcing credit-card transactions to use only one network. The rules would require covered card issuers to allow multiple payment networks to process the same credit card, with limited exceptions. It also creates a public list of networks that pose national security risks or are tied to foreign state entities.

• Main change: Covered card issuers (those with affiliates and assets over $100 billion) and payment card networks must not restrict routing of electronic credit transactions so that only one network can be used.
• Routing choice: Merchants who accept credit cards must be able to choose which eligible network handles a given transaction. Networks or issuers cannot penalize merchants for routing choices.
• Two-network rule: In limited cases the bill allows up to two networks to be used; the Board will identify the two largest networks and review that choice every three years.
• Security and interoperability limits: Networks cannot require exclusive authentication, tokenization, or other security tech that blocks other networks from processing transactions.
• Exemptions: Cards issued in a 3‑party model (where the card issuer and network are the same or commonly owned) are not covered.
• Enforcement and timing: The Board must issue rules within one year; each rule takes effect 180 days after the Board issues the final rule. The Consumer Financial Protection Bureau (CFPB) is explicitly not given authority to enforce these new rules.

What it means for you#

• Merchants and businesses that accept cards

  • Could be able to route each credit-card sale over the payment network they prefer, rather than being forced to use a single network.
  • Must not face penalties from card issuers or networks for routing choices, according to the bill.
  • This could mean options to pick lower-cost networks, but the bill does not set prices or require networks to offer lower fees.

• Banks and covered card issuers (assets > $100 billion)

  • Must allow eligible transactions on more than one payment network and must not contractually force single-network routing.
  • Need to change contracts and possibly update processing systems to support multiple routing paths.

• Payment card networks and processors

  • Must not block other networks from processing transactions or require network-specific security tech that other networks cannot use.
  • Networks that are owned, operated, or sponsored by a foreign state entity may be placed on a public national-security list and be excluded from routing options.

• Cardholders (consumers)

  • Using a credit card will look the same at the checkout. The bill does not directly change consumer fees, interest, rewards, or acceptance rules.
  • Indirect effects (for example on merchant fees that could affect prices or on issuer rewards) are possible but are not specified in the bill.

• Networks operating a 3‑party model

  • Cards that are issued by the network itself (3‑party model) are not covered by these rules and can continue their existing routing model.

Expenses#

No direct public cost estimate is provided in the bill text or summary materials.

• No publicly available fiscal note or spending estimate is included with the bill text provided.
• This could mean additional administrative work for the Federal Reserve to write, run, and update the rules and the public national-security list.
• Covered card issuers, payment networks, processors, and merchants may incur technology and compliance costs to support multiple routing paths and to remove contractual restrictions. These costs are not estimated in the bill text.

Proponents' View#

The bill appears intended to increase competition among payment networks and to give merchants more control over how transactions are routed.

• The bill appears designed to stop contract terms or technical measures that lock a credit card’s transactions to a single network.
• Supporters may argue this could let merchants choose lower-cost routing options and increase price competition among networks.
• The public national-security list is meant to prevent routing through networks that pose a national-security risk or that are controlled by foreign state entities.
• Requiring interoperable security methods could promote broader network compatibility.

Opponents' View#

The bill leaves several practical and enforcement questions unanswered and could create trade-offs.

• One concern is that the bill removes the CFPB’s authority to enforce these specific rules, leaving enforcement to the Federal Reserve; the bill does not explain how enforcement duties or resources will be assigned or funded.
• The bill does not detail how to handle technical interoperability, certification, liability, or fraud-prevention when multiple networks must be supported, which could create implementation challenges.
• Supporting multiple routing options could require changes to payment terminals, processors, and back‑end systems; the bill does not estimate these costs or how small merchants would manage them.
• The two-network allowance and the Board’s market-share test raise questions about how often routing limits might change and how networks will comply during those transitions.
• It is unclear whether and how the changes could affect cardholder benefits (like rewards programs) that depend on existing network-issuer relationships; the bill does not address such downstream effects.