The U.S. Capitol pictured on Nov. 26, 2024, in Washington, D.C. (Shauneen Miranda/States Newsroom)
It’s no secret that the last four years have been brutal for small businesses across South Carolina and the nation.
From the COVID-19 pandemic to heavy inflation, small businesses have struggled to make a profit and keep the lights on. Things could get much worse if Sens. Dick Durbin, D-Illinois, and Roger Marshall, R-Kansas, continue to push what I see as dangerous credit card legislation that would hurt small businesses, entrepreneurs, consumers, banks, and the economy as a whole.
In the previous Congress, Durbin and Marshall introduced the Credit Card Competition Act, which would have essentially allowed major retail stores like Walmart, Target, The Home Depot, and Kroger to process credit card transactions based on the best fee for them.
As a result, this would have stripped banks of the funding necessary for programs that small businesses rely on, such as cybersecurity, fraud protection, access to credit, and rewards.
In a time when small businesses have struggled to make ends meet in an inflation-heavy economy, we can’t let legislation like this pass.
While critics on Capitol Hill may blame banks and credit card issuers for inflation, data shows that the price gauging of major retailers has caused much of the havoc.
Credit card processing fees have ranged from 1.15% to 3.15% per transaction. The average rate from 2014 to 2019 was 1.8%. On the other hand, mega stores like Walmart, The Home Depot, Costco, and Kroger have pocketed hundreds of billions in revenue.
For example, Walmart, the largest retailer in the United States, has had an average of $583 billion in gross revenue since 2020.
Meanwhile, according to data from the U.S. Department of Agriculture’s Economic Research Service, there was a 25% increase in food prices from 2019 through 2023.
The Federal Trade Commission has blamed the profits of mega stores for inflation in grocery prices, and even major retail executives have admitted to price gauging. As bills like this pad the pockets of major retailers, Main Street small businesses gain nothing and lose everything.
Since the pandemic, small businesses have relied much more on innovative technologies for electronic transactions to compete in the market. This bill would jeopardize the funding for critical services such as fraud protection, data security, and improvement to the U.S. electronic payment system.
The new regulations would limit interchange for the benefit of major retailers while the funding and quality of services for small businesses would decline.
In addition, many small businesses in South Carolina rely on small financial institutions like credit unions and community banks for loans and access to credit. The routing mandates that this bill would implement would reduce the interchange revenue that smaller financial institutions use to lend to small businesses.
SC needs the Credit Card Competition Act to lower swipe fees
Despite what proponents of this legislation may say, history tells us it will harm small businesses. Look no further than Durbin’s amendment to the Dodd-Frank Act in 2010, which implemented debit card price controls and routing regulations.
Since then, 22% of major retailers have raised their prices and have pocketed over $145 billion.
Meanwhile, small businesses now pay higher debit card acceptance costs for small-ticket transactions.
A survey from the Small Business & Enterprise Council found that 87% of new business owners deemed electronic payment options as the most important decision for the launch of their
businesses. Legislation like the Credit Card Competition Act would hurt access to electronic payment options and technologies that small businesses heavily rely on to compete in the current
market.
The bill introduced in 2023 never got a vote and died with the end of the last Congress. But it could be renewed in a new Congress. And we can’t let harmful legislation like this continue to be pushed.
While some may see it as a clash of two titans between big banks and major retailers, I hope Sens. Graham, Scott, and the entire South Carolina congressional delegation will see the many small businesses that are the backbone of our economy and the risks it could pose to us.