R Street Testimony in Opposition to Texas House Bill 4061: “Relating to unlawful practices relating to credit card transactions; providing a civil penalty”
Testimony from:
Caroline Melear, Fellow in Finance, Insurance, and Trade, R Street Institute
In OPPOSITION to House Bill 4061: “Relating to unlawful practices relating to credit card transactions; providing a civil penalty.”
April 14, 2025
The House Committee on Pensions, Investments, and Financial Services
Chairman and members of the committee,
My name is Caroline Melear. I am a fellow in Finance, Insurance, and Trade at the R Street Institute (RSI), which is a nonprofit, nonpartisan, public policy research organization. Our mission at RSI is to engage in policy research and outreach to promote free markets and limited, effective government in many areas, including promoting healthy financial markets. As such, we are keenly interested in House Bill 4061.
A central theme among much of our advocacy is the recognition that government interventions in the free market often harm those they purport to help, which is precisely what would happen with the passage of this bill. Currently, merchants of all sizes in Texas and across the country are able to process card transactions quickly, efficiently, and safely. This is due to the well-functioning and reliable payment systems that are in place. These payment systems are especially beneficial to smaller merchants because they allow them to seamlessly accept all types of credit and debit cards, the most commonly used forms of payment.[1]
However, the bill in question would dismantle this intricate system by requiring that merchants negotiate individual agreements with hundreds of banks. In reality, many small and medium sized businesses lack the time, resources, and manpower to negotiate individual agreements. Instead of those businesses realizing any potential fee savings, they would be buried under a multitude of barriers to accepting a wide range of cards. Meanwhile, larger retailers who have entire departments dedicated to navigating the regulatory landscape will keep up with business as usual. This will harm smaller businesses, making them less competitive and less attractive to a broader range of consumers.
The attempt at credit card pricing transparency which would be passed to the consumer via their monthly statements will only lend to confusion. Currently, interchange and other fees fund a multitude of programs that consumers rely on, including security and rewards programs, which consumers consistently cite as top reasons for selecting particular cards in the competitive card marketplace.[2] Not only would this bill lead consumers to believe they are being hit with additional fees, it will slash funding for these vital programs that customers and merchants alike benefit greatly from.
Despite the bill’s aim to empower small businesses consumers, both parties will be left feeling confused, frustrated, and with less financial flexibility. The bill disrupts a well-functioning, reliable payment system that ensures all parties are satisfied, properly compensated, and made whole in the event of any issues, and unintentionally bolsters the standing of the biggest players.
Given these concerns, the R Street Institute opposes House Bill 4061.
Caroline Melear
Fellow, Finance, Insurance, and Trade
R Street Institute
(404) 374-3248
cmelear@rstreet.org
[1] “The Growth of the Credit Card Industry in 2023,” Clearly Payments, July 27, 2023. https://www.clearlypayments.com/blog/growth-of-credit-card-industry-in-2023/
[2] “The Convenience Catalyst: How Customer Experience Features Drive Credit Card Usage,” pymnts.com, December 2021. https://www.cupartnership.com/content/dam/common/cupartnership_cc/documents/cu-pdfs/2021-ECC-PYMNTS-Convenience-Catalyst-Report.pdf