The following content is sponsored by the Electronic Payments Coalition.
A 2022 Gallup poll found that a majority of Americans believe the federal government possesses too much power.
Federal bureaucrats and politicians like Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) often claim expertise and leverage their power when it comes to issues of American businesses and consumers – but do they consider how American business owners and consumers feel themselves?
Senators Durbin and Marshall proposed harmful legislation that would alter the credit card routing system under the guise of “boosting competition.” When was the last time the federal government was successful in boosting free market competition?
In reality, their legislation threatens to fundamentally disrupt our current safe, secure, and hassle-free system by introducing untested alternative networks. Supporters argue using these untested networks will allow retailers to cut costs and, in turn, pass these savings on to consumers – truth is, they will do anything but.
Countless studies have reported consumers and small businesses would see little to no benefits from this bill. A study by the University of Miami found that if passed, this legislation will place small businesses at a greater competitive disadvantage against corporate megastores than already exists. America’s top 100 retailers like Walmart and Target stand to gain nearly $3 billion, with $1.2 billion of that going to the top five largest retailers alone.
Worst yet, mom-and-pop shops would not only miss out on any potential cost benefits, they would also lose out on their own rewards. Small business operators currently receive roughly $12 billion in credit card rewards when they make purchases on their own forms of credit, which constitutes roughly one-tenth of all credit card rewards.
These studies aren’t just baseless predictions. In 2010, Sen. Durbin convinced Congress to pass the Durbin Amendment, which required the Federal Reserve to cap interchange fees for debit card purchases. Since then, billions of dollars have been handed to large corporate retailers. The Federal Reserve Bank of Richmond found that 98 percent of businesses raised prices or kept them the same when these mandates were placed on the debit interchange. The Congressional Research Service has also questioned whether consumers or small businesses would benefit at all.
Moreover, the average credit card interchange rate has remained virtually flat at about 1.8 percent for eight years. The Small Business and Entrepreneurship Council themselves see value in credit cards and recently published an analysis on how businesses get security, efficiency, and cost-saving benefits from offering credit card payment options compared to cash transactions.
Many industries recognize the Durbin-Marshall legislation for what it is: harmful to consumers, our economy, and our communities. But when they attempt to voice concerns about the potential threat to Americans, they often face further harm at the hands of big government.
For instance, Airlines for America (A4A) released a study citing the significant damage the credit card bill would cause to the travel and tourism industry and the U.S. economy at large, citing its negative effects on credit card rewards and loyalty points programs.
As expected, Senators Durbin and Marshall used their political power and government influence to launch a retaliatory campaign against the airline industry, calling on the Department of Transportation (DOT) and the Consumer Financial Protection Bureau (CFPB) to hold a hearing on airline reward programs – which of course they did.
The unchecked power of federal bureaucrats like Senators Dick Durbin and Roger Marshall must be stopped. Their proposed credit card mandate will not help American consumers or small businesses – it will only expand government control at the expense of our economic prosperity. It’s time to put an end to big government overreach and reclaim the power of choice for those who deserve it: the American people.