Lane: Time for Congress to Stand Up for Small Businesses on Swipe Fees
Like Christmas commercials, campaign season seems to start earlier every year. And like Christmas, we’re going to see many wish lists and hear a lot of promises.
[IMGCAP(1)]Over the next few months, politicians, whether they’re fighting a tight primary or a partisan battle, revert to those tried and tested messages that may resonate with the electorate: cut spending, lower the deficit, reduce taxes — the list goes on. Personally, having observed several presidential, Senate and Congressional races, the message I’ve gotten used to pertains to “small businesses.”
Yes, if you could find me an individual who has run for office and never proclaimed how his or her policies will help small businesses, I’ll give you $100. In fact, giving away money is something that small businesses are used to doing on a regular basis. I am, of course, talking about the astronomical increases in debit and credit card swipe fees.
Ostensibly, swipe fees are the costs that businesses pay banks and credit card companies to cover the transaction. Electronic payments are safer, more secure and much more convenient for consumers. We are willing to pay our fair share for offering this convenience to our customers. The problem is, the actual fee that we pay to the banks and credit companies bears absolutely no relation to the real cost of the transaction. According to reports and studies, less than 20 percent of the cost of the swipe fee goes toward covering the actual transaction, with the rest going toward profits, bonuses and rewards cards.
Why? Because these swipe fees are set by a cartel (Visa and MasterCard) that controls more than 80 percent of the market and can unilaterally hike up its prices. In just under a decade, these fees have increased by 300 percent. As a result, small-business owners like me have two options: 1) eat the cost and lose money, or 2) increase prices to offset the increase.
With these spiraling swipe fees, most of us are forced to pass on these costs to consumers who are now paying more and more for goods and services, even if they use a cheaper form of payment such as cash. It goes without saying that millions of small-business owners in America are sick of the status quo, especially when we’re expected to create jobs and spearhead the country’s economic recovery. Well, it’s pretty difficult to do this when the big banks and credit card companies are making more off my business than I do!
Fortunately, help is at hand. Last month, the Senate overwhelmingly passed an amendment by Sen. Dick Durbin (D-Ill.) as part of its regulatory reform bill. This bipartisan vote demonstrated to those of us who have been crying out for commonsense swipe fee reform that Wall Street doesn’t always call the shots on Capitol Hill.
What the Durbin amendment does is simple. It asks the Federal Reserve to regulate these fees so they are “reasonable and proportional” to the actual cost of the transaction. As I said earlier, the status quo forces small businesses like mine to lose money and line the pockets of the bank executives and credit card companies. These fees have become so high that when I sell a customer a cup of coffee or a newspaper, the swipe fee makes it cheaper for me to just give the product away for free. How am I meant to hire new workers if Visa and MasterCard are forcing me to cut a loss?
Furthermore, the Durbin amendment also allows small businesses to offer discounts to customers if they use a cheaper payment method. All this does is overhaul the credit card cartel’s attempt to monopolize the payment system and allow cash, checks and debit cards to compete with one another on a free market basis. For those of us who live by competition and markets, it’s something that we’re more than used to. Visa and MasterCard on the other hand shudder at the idea and spend millions of dollars smearing small businesses that need this reform to keep their doors open.
Your elected Members have a clear choice right now. America’s small businesses are not asking for special treatment akin to Wall Street’s welfare. Instead we just want fairness. For the markets, not monopolies, to decide how much a payment transaction costs. We want competition, not cartels. The Durbin amendment offers Members of the House and Senate the opportunity to back their campaign rhetoric with action and support commonsense swipe fee reform that will boost small businesses across the country.
Once the votes are cast, you’ll know which side they are on.
Dennis Lane has owned and operated a 7-Eleven franchise in Quincy, Mass., for 36 years. He is also the national spokesman for Reform Swipe Fees NOW!