Policies hurt small businesses

As a former small business owner and the mayor of a town that relies heavily on locally owned shops and restaurants, I am very concerned about the fact that the federal government is looking at a financial policy that will damage our economy.

Over a decade ago, a piece of federal legislation hurt our small businesses and banks. I am referring to a last-minute amendment by Senator Durbin (D-IL) to the Dodd-Frank Wall Street Reform Bill.

This amendment, which was billed as something that would save money for retailers so they could lower prices for consumers, imposed a 22-cent cap on debit card swipe fees. It also created a routing mandate for processing debit card transactions.

The Durbin Amendment did help big box stores gain about $90 billion in extra revenue, but it did more harm than good when it came to consumers, small retailers, and our local banks.

Although big box stores such as Walmart saved billions of dollars because of the cap on debit card swipe fees, they did not pass that savings on to consumers. In fact, some of the large retailers even raised their prices.

Small retailers were also hurt by this legislation. Because they lost a large amount of money generated by swipe fees, banks tried to recover their losses immediately. They started charging the full 22-cent cap on all debit card transactions no matter what the amount.

For many small retailers, this 22-cent charge was much higher than what they typically would have paid, which was a percentage proportional to the transaction.

A study by the Federal Reserve Bank of Richmond found that most swipe fees rose to the 22-cent cap, which tripled small purchase swipe fees for some small businesses.

Small debit card purchases suddenly became very expensive for businesses. This forced some small businesses to stop accepting debit cards altogether. Others were forced to pass that cost onto customers. I am sure you have seen the little signs that popped up at our favorite stores announcing that there was a minimum purchase amount or that a fee had been added for debit card transactions.

Now Congress is looking at extending this swipe fee cap to credit cards and the impact will be worse than when this was done to debit cards 12 years ago.

Banks will lose billions of dollars and will be forced to earn that money back by charging small businesses the full swipe fee to process every credit card transaction.

Studies have shown that in countries like Australia where credit card swipe fees have already been capped, banks have reduced credit card rewards and made credit more expensive by increasing fees and interest rates.

We have to protect our small businesses. Towns like Parsons depend on small, unique stores and locally owned restaurants. They power our local economy. They donate to our local sports teams and to our churches.

We cannot allow them to suffer because big box stores want to save money by capping credit card swipe fees.

I hope our delegation in Washington, D.C. will see this as well and oppose any attempts to cap credit card swipe fees.

Dorothy Judy is the mayor of Parsons.


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