The column below reflects the views of the author, and these opinions are neither endorsed nor supported by WisOpinion.com.
I am strongly opposed to the Credit Card Competition Act (Senate Bill 1838), sponsored by U.S. Senators Dick Durbin (D-IL) and Roger Marshall (R-KS). The bill is being presented as a winning option for the US economy, but small businesses will be the biggest losers while large retailers stand to gain the most.
While the CCCA sounds pleasant in its plans to reduce the fees charged to retailers to process credit cards, the bill actually requires more restrictions on credit card processing companies through routing fee mandates. This legislation is nothing more than a government handout for massive retailers, giving them the power to decide which network to route credit card transactions over. It may help stores like Walmart and Target, who are looking to cut costs, but it will hurt those doing business on Main Street, who are still recovering from record high levels of inflation and economic uncertainty.
Large retailers obviously want to see this legislation pass because it allows them to pay less to accept credit card transactions and they will continue to make more money than they already do. Meanwhile, mom and pop shops on Main Street pay the price.
If billions of dollars in funding move away from the credit market, banks will have to recoup their losses by a reduction in what they can loan to small businesses. This will come at the same time that small businesses face higher costs when they can least afford it. They will lose important services such as fraud monitoring and prevention currently in the system, as well as access to established networks and credit card rewards programs.
More than anything, local merchants want to provide payment options that are safe, reliable, and secure. Networks like Mastercard and Visa have spent billions of dollars over decades to invest in technologies that will protect consumer information and finances. These investments create more competition and provide stronger security. But the CCCA will undermine the trust and protection that has taken so long to build.
These new payment processing networks who have not invested as much in security will have an opening, and small businesses will be unable to offer the consumer protections that their customers rely on. Ultimately, the reduced satisfaction with electronic payments at the same time as increased risk means that small businesses may pay more for less. This puts entrepreneurs who are committed to their local communities at a significant disadvantage, all while adding more to the bottom line of already massive retail corporations.
The loss of funding for credit card rewards programs doesn’t just hurt consumers, it also hurts small businesses who often use points and cash back options to cover expenses. These additional costs will reduce the ability for small businesses to provide benefits, healthcare, expansion, and inventory management. These are crucial to help them manage their resources in an environment that is already competitive enough!
In 2010, Senator Durbin’s amendment to Dodd-Franklin legislation implemented controls and regulations for debit cards similar to what he is proposing now. The big corporations promised they would pass those savings on to consumers, but promises are easily made and easily broken. The savings were never passed on, and in the end, big retail corporations got the profits at the expense of everyone else. We have no reason to believe that anything different will happen this time around.
Small businesses deserve policies that strengthen them and help them to survive. In an environment where it is difficult enough to achieve success going up against big corporations, this bill weakens their resilience and makes them a target.
If S.1838 becomes law, it sends a clear message: big corporations win, small businesses lose. I encourage Sen. Johnson and Sen. Baldwin to stand with Wisconsin small businesses, and oppose this legislation.
– Rob Rasmussen is a retired tutor and lives in Oak Creek, Wisconsin.
