One thing I’ve alluded to in a few different posts before is the effect of consumer protection legislation on certain aspects of the hobby. Things like state restrictions on gambling or federal legislation regulating interchange are written (in theory) to protect consumers.

And in general, I think we’d all agree that protecting consumers and small businesses from predatory fees and business practices is a good thing. But in many cases, these laws are wildly convoluted, creating both heaps of confusion and opportunities to exploit inefficiencies. 

Today, we’re going to focus on legislation that aims to regulate interchange and interest rates and how that affects us as MSers. As discussed in the interchange post, there’s a wide range of standard rates charged globally. 

When looking at western countries, the US and Canada stand alone with average credit card interchange fees around 1.5% (Canada) and 2% (US). In comparison, most of the EU is capped at 0.3%, Australia is capped at 0.5%, China is 0.35%, etc. etc. 

These fees aren’t good for your average merchant, and they’re a big reason why your local bar and grills increasingly have the “cash price | card price” menu. But for better or worse, they are a major part of what enables the fairly unique rewards systems in North America, together with our sky high credit card interest rates. 

I find the political discourse around credit card interest rates and how it relates to consumer protection extremely interesting because it’s one of the rare issues in Washington that produced a bipartisan proposal.

But it’s been 20 months since S.381 was proposed, and when Jamie Dimon takes the stage in Davos and says that a 10% cap on credit card interest would lead to “economic disaster”, it’s fair to say there is too much institutional resistance for the bill to get passed.

While this bill is unlikely to go anywhere in the face of that resistance, there are other times where the big banks don’t get what they want (granted, in a very different political and economic landscape). 

Those who were old enough to care at the time (I was not) will remember Dodd-Frank, the major legislative response to the 2008 financial crisis. While it’s been 16 years since it passed, the act continues to have plenty of influence on our hobby.

While a lot of the headlines like Volcker and changes to mortgage lending were important as a response to the crash, they weren’t really relevant to MS. However, one could argue that certain parts of it created the current state of MS that we’re in.

First off, Dodd-Frank established the CFPB. While it’s unfortunately toothless these days, it reunited many MSers with funds unfairly frozen by sketchy fintechs before it was gutted. 

However, the most consequential part of the legislation for us requires some scrolling past the summary paragraph on Wikipedia and, like many inclusions on large acts like this, was far from the main focus and added during consideration of the main legislation.

At face value, it’s not super interesting. But there’s things both at the middle and at the very bottom of the proverbial MS iceberg that are fully enabled by certain items in this legislation.

If Dodd-Frank hadn’t passed, we would have been spared a lot of the dead plays of the last year or so, because they never would have been feasible in the first place. 

While there isn’t a clear number to call out, Chase pays United a pretty penny for all of the MileagePlus miles they issue, plus whatever else they’re paying as part of the partnership. So why don’t they issue the United debit, instead of some random bank in Minnesota? 

Well, would you use a United co-branded debit card that didn’t actually earn any UA miles? Maybe the most DYKWIA Global Services flyers would, but nobody reading this blog would.

Next time you joke with a fellow MSer that “we need to make a churning friendly fintech!!!”, remember that the hard part isn’t starting the fintech – it’s finding the unlikely bedfellow within the carveout that is also ok with wild shenanigans. Credit where credit is due to those who have succeeded.

ꯅꯨꯡꯉꯥꯏꯕ ꯐꯣꯛꯗꯣꯛꯄ!

Pictured: the competitor that beat you to the punch of finding a fitting “unlikely bedfellow” to offer their product