The perils of misinformation: Protecting consumers in the age of misguided lobbying

In an era where information flows freely and quickly, misinformation has become a pervasive issue that affects relevance, reputation, and ultimately, the bottom line. Credit unions are woefully accustomed to ongoing existential threats but with misinformation leveraged as a weapon, the once-familiar battleground has turned into a hazy field of confusion.

Weaponized misinformation is evident in banks’ recent efforts to attack credit unions’ tax status, a popular scapegoat when they’ve run out of feasible arguments against credit unions. A recent op-ed in RealClear Markets featured CUNA President/CEO Jim Nussle and NAFCU President/CEO Dan Berger setting the record straight on a recent survey from bankers that misleadingly asserts consumers don’t support the credit union tax exemption.

The study – sponsored by the American Bankers Association – shows that a “wide majority of respondents (62%) said that Congress should examine whether credit unions are providing enough community benefit to warrant their existing tax exemption.” How would these results be different if the average American consumer knew the depths to which credit unions work to serve low- and middle-income communities?

According to the study, 82% of the survey’s 2,211 respondents were unaware of credit unions’ tax status. It’s understandable for the average respondent outside of the financial services industry to be unaware about credit unions’ tax status. It’s also understandable that the average community banker – the very bankers who are perpetuating the “credit unions don’t pay federal taxes, how unfair” narrative – may not know that credit unions pay nearly $25 billion annually in local, state, and federal taxes. They may also be unaware that credit unions provide $18.9 billion annually in financial benefits to consumers through higher savings and returns, lower loan rates, and fewer fees. Or that credit unions generate $4.9 billion in annual benefits to all consumers due to the competitive presence of credit unions in local banking markets. (I go more in depth on this topic in my 2021 CUInsight article, Debunking Myths: 4 Indisputable Credit Union Facts).

A lack of information can be a form of misinformation. What can we do as credit union people to combat this?

Misinformation to push legislative agendas

The Credit Card Competition Act of 2023 highlights the pressing need for grassroots credit union advocacy and fact-checking in our society. Powerful merchant trade groups with deep pockets wield considerable influence over legislators, planting seeds of misinformation in the form of carefully coordinated articles, misleading messaging, unrealistic promises, and lobbying efforts.

Misinformation often takes root when self-interested groups with ample resources set out to advance their own agendas. In the case of the CCCA of 2023, some supporters of the bill have been spreading misleading information to stoke fear and uncertainty. These groups often misrepresent the facts about proposed legislation, creating a distorted narrative that serves their interests while harming consumers.

It is perhaps this distorted narrative that caused the Federal Reserve to announce a proposal recently to give debit interchange yet another haircut. This is especially troubling given the Federal Reserve of Richmond conducted a merchant study alongside Javelin Strategy and Research about the impact of the 2010 Durbin Amendment. In a 2015 Economic Brief, the Richmond Fed revealed that “While issuers have lost billions in revenue, the costs of accepting debit cards have not gone down for many merchants in the survey; and for some merchants, the costs have even increased.”

The misinformation is coming from inside the house.

Recently, members from nine financial trade industry trade organizations came together to ask the Federal Reserve to reject any merchant requests for further changes to Regulation II governing debit card interchange fees. The letter stated, “The merchant petitions and presentations to the Board demanding action on Regulation II are riddled with errors, misleading statements, and false comparisons that appear designed to deceive. As in the merchant groups’ litigation against the Federal Reserve on Regulation II, there is consistent cherry-picking of facts and omission of ‘inconvenient evidence’ that contradicts their advocacy efforts.”

I find one of the most egregious pieces of misinformation perpetuated by supporters of the CCCA to be the argument that “it’s good for consumers.” When an issue such as the Credit Card Competition Act of 2023 comes up, it’s consumers’ financial well-being that becomes the focal point…at least for credit unions.

The points I raised in my 2022 CUInsight article, The Credit Card Competition Act Pours Salt on a Wounded Economy, still stand:

A 2017 study by the Federal Reserve found that the fee cap made banks 35% less likely to offer free checking accounts. According to the study: “[This result suggests that] absent Reg II, 65.2% of non-interest checking accounts offered by covered banks would have been ‘free,’ compared with the actual post-implementation figure of 30.0%.”

Additionally, the Electronic Payments Coalition suggests in the Myth vs Fact section of its website that merchant cost savings from Durbin 1.0 were not necessarily passed through to Main Street consumers as intended and that the legislation has negatively affected the community.

“So while Reg II essentially made the most vulnerable consumers less profitable for banks by removing valuable interchange that helped to subsidize free checking, surely the retailers passed their savings on to consumers, right?” Dean Michaels, president/CEO of Co-op Solutions, teased. “Based on a merchant survey by the Federal Reserve Bank of Richmond and Javelin Strategy & Research which was conducted two years after the regulation was established, only 2% of retailers said they had lowered their prices because of the regulation.”

I have often wondered why even educated, well-read people can be so susceptible to misinformation. I have some theories:

Cognitive bias: Human beings have inherent cognitive biases, which lead them to seek and interpret information in a way that confirms their preexisting beliefs. People who are experiencing financial strain may think “fees are too high.” A strong, well-funded message promising lower fees is going to land with this line of thinking. Anyone can unknowingly gravitate toward information that aligns with their views, ignoring contradictory evidence.

Information overload: Under the influence of cognitive bias, the vast amount of information an individual consumes on a daily basis can cloud one’s vision. It can be challenging to discern credible sources from unreliable ones, leading individuals to consume information that may be inaccurate or misleading.

Emotional appeal: Misinformation often leverages emotional triggers, such as fear, anger, or excitement, to captivate individuals. These emotional responses can override critical thinking, making people more susceptible to accepting false or misleading information.

Rapid information spread: Misinformation can spread quickly through social media and other digital platforms, often in the form of eye-catching headlines or memes. The rapid dissemination of misinformation can outpace the efforts of even intelligent individuals to fact-check or verify information.

Complexity of issues: Many topics are intricate and nuanced, making it difficult for people to discern accurate information from misleading content. Misinformation tends to oversimplify complex issues, making it more accessible and appealing.

Solutions: Be genuinely curious about both sides of the story and selective about the information you consume. Be intentional about the time you spend on social media or subreddits. Inform yourself intentionally by conducting your own research from trusted, reputable information sources.

In our interconnected world, access to accurate information and the ability to form one’s own opinions based on facts have never been more critical. We must be wary of those who seek to manipulate the truth for personal gain. Our economy and financial services landscape depend on an informed and vigilant citizenry that can distinguish between fact and fiction, especially when it comes to matters as consequential as financial legislation.

Ultimately, the Credit Card Competition Act of 2023 underscores the broader issue of misinformation and the undue influence of trade groups on our legislative process. It serves as a reminder of the importance of transparency, ethical lobbying, and a genuine commitment to consumers’ financial well-being. It is the duty of lawmakers and citizens to prioritize the truth, protect our financial system, and ensure that policies serve the greater good rather than the interests of a select few.

In the face of this misinformation, grassroots credit union advocacy is crucial. Organizations like the CUNA and credit union leagues play an integral role in educating the public about the true intentions of the Credit Card Competition Act of 2023. These benevolent credit union trade groups, dedicated to promoting the interests of credit union members, work tirelessly to provide accurate information and counteract the misleading narratives being circulated.

Fact-checking, critical thinking, and big-picture thinking are essential tools for combating misinformation. It’s incumbent upon citizens and legislators alike to sift through the noise, verify the claims being made, and consider the long-term implications of any legislation. This diligence is particularly crucial when financial well-being is at stake.