Protecting Credit Card Rewards
 
Independence Day is known for many things. Some might think of everything and everyone all decked out in gawdy red, white, and blue attire. Others surely think of hot dogs and fireworks. Another feature of the Fourth of July is the immense amount of travel. This year alone, AAA Travel projected almost 71 million Americans would travel in some way, shape, or form this Fourth of July.  According to the Transportation Security Administration (TSA), more than 3 million people flew on Sunday July 7^th. – a record level. Many Americans have the opportunity to travel because of the credit card rewards they get from airline travel or from purchasing gas. Others fund their travel with rewards from prior transactions. Even those not traveling use rewards programs and cash back to help lessen the sticker shock of inflation when they stock up on food and drinks for a holiday picnic. This ecosystem is a hit with consumers and helps stimulate the American economy and local businesses. However, Congress and the Biden administration are considering proposals that would jeopardize the rewards on which millions of Americans rely.
 
Last year, Senators Dick Durbin (D-Illinois) and Roger Marshall (R-Kansas) introduced the Credit Card Competition Act (CCCA). The bill establishes a one-year timeline for the Federal Reserve to issue sweeping regulations on American credit card companies. The regulations would force credit card companies to allow their transactions to be processed by multiple networks. CCCA also dictates that at least one of the networks has to be a network other than Visa or Mastercard – the two largest players in the payment processing market. Ultimately, this would cause credit card issuers to cut back severely on rewards programs. Credit card rewards are largely funded by interchange fees. These are the fees that networks like Visa and Mastercard charge retailers to process transactions. The fees generate revenue for credit card companies that allow them to create popular rewards programs. They create revenue that makes lending to “higher risk” customers more sustainable. They also make transactions safer, as ensuring processing goes through a trusted network benefits both retailers and consumers. Fees typically range between one and three percent of the total amount of any given transaction. According to estimates, 15 million domestic trips are awarded through credit card reward points in the U.S. annually. Credit card rewards generated $23 billion in economic activity in the U.S. in 2022 alone. Last year, 9 percent (or more than 56 million) of total passengers used $0 fare tickets. If CCCA becomes law, Fourth of July travel will look very different in years to come. By losing access to rewards points, travelers will lose their spending power. American businesses will miss out on much of the economic activity associated with travel. Unfortunately, Congress is not the only government entity interested in disrupting the reward points ecosystem in the U.S. In May, the Consumer Financial Protection Bureau (CFPB) held a joint hearing with the Department of Transportation (DOT) to discuss supposed “issues” with airline rewards programs. The DOT and CFPB set out to demonstrate that these programs were unpopular with consumers and were predatory in nature. This hearing was often bereft of any actual evidence. Meanwhile, the evidence shows the vast majority of travelers – across generations – value airline loyalty programs. Bureaucrats and witnesses tried to demonstrate lack of competition in the credit card and airline markets. However, the data shows the average American owns almost four different credit cards. Further, both Spirit and Allegiant airlines were represented on the panel and both testified to the value rewards programs have for their businesses – both seeking to compete with the “major” American airline companies.
 
With proposals like CCCA, the federal government is seeking a solution to a problem that simply does not exist. As throngs of people flood American airports this Fourth of July, or pull into American gas stations, wearing novelty clothing items emblazoned with the American flag, lawmakers should remember this. Such displays of patriotism and economic activity that support businesses from sea to shining sea are made possible by the ingenuity of American credit card companies and their desire to create rewards programs that serve the American people. It would be a shame to disrupt all that. If Congress wants Americans to travel and to enjoy the Fourth of July (or any other holiday) to the fullest, it should stop the assault on credit card rewards programs.
 
Regulatory Pulp Friction 
 
Orange juice doesn’t taste so good when brand-name bottles approach $7. According to a recent ABC News report, “In the U.S., a 12-ounce can of frozen orange juice concentrate cost an average of $4.27 in April, 42 percent more than during the same month a year earlier, according to government figures. … Orange juice consumption has fallen 15 percent to 25 percent in major global markets — including the United States and the European Union — over the last year.”  Bad weather and disappointing harvests are battering supply, and recently released Freedom of Information Act records show outdated federal regulations and a regulatory turf war are making the problem even worse. Policymakers need to peel back onerous rules and let the juice flow. Out-of-control regulations have ensnared a simple beverage in a pulpy web of administrative compliance. The Food and Drug Administration (FDA) maintains “standards of identity” for various foods and beverages, specifying specific attributes a product must have to earn a particular food label. For example, the FDA has long maintained that frozen cherry pies must contain enough cherries (by weight) and cannot contain too many blemished cherries.  Orange juice standards are even more convoluted. The FDA pays close attention to the “Brix level” of pasteurized orange juice, which measures the internal sugar solids in a fruit. The agency considers anything less than a 10.5 percent Brix level unacceptable, resulting in orange juice makers having to be increasingly picky about the oranges they use.
 
Recently, the Taxpayers Protection Alliance Foundation requested internal FDA correspondence to shed light on the turtleneck speed of reform. The resulting trove of information gave critical insight into the process. Since 2022, FDA employees have been busy working on the petition and verifying that the nutrition data submitted by the petitioners was accurate. The Achilles’ heel has unexpectedly been the Department of Agriculture, which must be “kept in the loop.”  When the FDA contacted the USDA and asked if there would be “any concerns” if “we remove the minimum Brix level for orange juice,” the USDA tersely responded that the policy change “would not be consistent with the Codex standard, because 10 Brix is the absolute minimum requirement.” The USDA has its own minimum requirements for juice Brix content, and the FDA cannot force its counterpart’s hand. This doesn’t seem likely to change soon because, as one FDA employee notes to another, “I am not aware that Codex is currently working on any updates to the standard.” 
 
These frustrating exchanges offer a sobering lesson for businesses and their consumers. Prominent agencies such as the FDA may want to make pro-consumer changes, only to be stymied by regulators lurking in the background. Meanwhile, petitions sit on the sidelines as agencies half-heartedly request more information. Unfortunately, these bureaucratic machinations are not “pulp fiction.” Consumers can expect sky-high orange juice prices until regulators stop souring on promising reforms.


Blogs:

Tuesday: Congressional Oversight Needed for EPA’s CARB Waiver

Wednesday: Taxpayers Are Paying for Bad Regulations’ Doomed Courtroom Defenses

Thursday: Regulatory Overreach is Not Pulp Fiction

Friday: What You Should Be Reading: June 2024

Media:

June 29, 2024:  Townhall.com ran TPA’s op-ed, “Helium Leaks and Mission Creep Cost Taxpayers Dearly.”
 
July 1, 2024: WBFF Fox45 (Baltimore, MD) interviewed me for their story on car registration fees increasing.
 
July 1, 2024: WBFF Fox45 (Baltimore, MD) quoted me in their story about the Baltimore County Council approving charter amendment to expand council size.
 
July 2, 2024: WBFF Fox45 (Baltimore, MD) quoted me in their story about the Baltimore Baby Bonus program.

July 2, 2024: Inside Sources ran TPA's op-ed, "Regulatory Overreach is Not Pulp Fiction."
 
July 3, 2024: WBOB AM (Jacksonville, FL) interviewed me for their story on cutting the payroll tax and federal government overreach.
 
July 3, 2024: Prescott eNews (Prescott, AZ) mentioned TPA Foundation in their article, “Regulatory Overreach is Not Pulp Fiction.”
 
July 4, 2024: Townhall.com ran TPA’s op-ed, “Credit Card Rewards Programs Are As American As Apple Pie.”

July 5, 2024: Law and Liberty ran TPA's op-ed, "Murthy's Maddening Modesty."
 
July 7, 2024: Foxbusiness.com quoted TPA in their article, “US national debt to surge to record levels without reform — raising prospect of fiscal crisis.”
 
July 7, 2024: MSN United States mentioned TPA in their article, “US national debt to surge to record levels without reform — raising prospect of fiscal crisis.”
 
July 7, 2024: The Baltimore Post (Baltimore, Md.) mentioned TPA in their article, “US national debt to surge to record levels without reform — raising prospect of fiscal crisis.”
 
July 7, 2024: NewsExplorer.net mentioned TOA in their article, “US national debt to surge to record levels without reform — raising prospect of fiscal crisis.”
 
July 7, 2024:  Conservative Angle mentioned TPA in their article, “US national debt to surge to record levels without reform — raising prospect of fiscal crisis.”
 
July 7, 2024: KXII CBS12 (Sherman-Ada, Texas) quoted TPA in their story about the NTSB.
 
July 8, 2024: The Boston Herald (Boston, Mass.) ran TPA’s op-ed, “Regulatory overreach not pulp fiction.”
 
July 8, 2024: The Tampa Free Press (Tampa, Fla.) ran TPA’s op-ed, “Conservative Groups’ Open Letter To Congress On Inflation Reduction Act.”
 
July 9, 2024: Real Clear Health ran TPA’s op-ed, “The Evidence is Clear: Bans on Flavored Vaping Products Are Harming Public Health.”
 
July 10, 2024: The Washington Examiner (Washington, D.C.) ran TPA’s op-ed, “How Biden’s regulations harm consumers.”
 
July 10, 2024:  The Washington Examiner (Washington, D.C.) ran TPA’s op-ed, “Biden’s antitrust approach will harm small businesses and raise prices at the counter.”

July 10, 2024: Issues and Insights ran TPA's op-ed, "The Destructive Influence of Pharmacy Benefit Managers."
 
July 11, 2024: WBFF Fox45 (Baltimore, MD) interviewed me about Baltimore County potentially adding two council members 
 
July 11, 2024:  The Washington Examiner (Washington, D.C.) ran TPA’s op-ed, “The IRS has a penchant for targeting everyday Americans.”
 
July 11, 2024:  The Washington Examiner (Washington, D.C.) ran TPA’s op-ed, “Protectionism forgets the interests of the average American.”
 
July 11, 2024: Real Clear Markets ran TPA’s op-ed, “Destructive Influence Of Pharmacy Benefit Managers.”
 
July 11, 2024: WBFF Fox45 (Baltimore, MD) interviewed me about the new Baby Bonus Program.
 
July 11, 2024: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about Project 2025 and the RNC Platform.

Have a great weekend!