HB 476 would impose price controls on credit card interchange

HB 476 is another in a long line of bad ideas that have been put forth in legislation during the 2025 session here in New Mexico. Thankfully, to date, it has received little interest, but that could easily change in the 2nd half of the legislative session.

This bill would prohibit interchange fees on electronic payment transactions in New Mexico. Thus, the State of New Mexico would be in charge of controlling the price of operating a credit card network – risking higher costs for consumers in a time of continued inflation.

The bill mirrors federal attempts to impose price controls on operating credit card networks (these have been opposed by the Rio Grande Foundation). Analyses of federal bills, such as the federal Credit Card Competition Act, consistently find that consumers will not benefit from future savings under these policies. A report from the Government Accountability Office, for instance, stated that if similar regulations that apply to debit cards “had not been implemented, 65 percent of noninterest checking accounts offered by covered banks would have been
free.” Additional regulation on credit interchange will affect fees and interest in the credit market, thus increasing costs for consumers.

Additionally, a Federal court partially granted an injunction to banks in an Illinois case which held that the state prohibition on interchange fees applies to Illinois chartered financial institutions, but not other banks. While state-chartered institutions received no injunctive relief, larger banks managed to successfully argue against interchange fee regulation. States that pass analogous laws will only hurt local banks chartered within their borders while leaving larger financial institutions with an unfair
advantage.

Price controls levied on interchange fees are diametrically opposed to free market principles. All legislators should oppose such laws and any attempt at price controls for credit cards.
Under HB 476, the government would insert itself into this functioning system and try to make one party bear the full burden of the costs of operating a card network by preventing payment processors from applying the usual interchange fee to the full amount of a transaction. Like every government attempt to control the market, there will be unintended consequences. If processors are forced to create new systems, software, and even new equipment, costs for small businesses and consumers in New Mexico

would rise. These added costs will be placed on the processing system, merchants will pass them down to consumers, and everyone will lose.