Don't Let Big Banks Obstruct Swipe Fee Reform
Debit swipe fees now cost American businesses over $16 billion a year, and exorbitant fees on debit transactions have a disproportionate impact on small businesses. Last year, Congress passed an amendment in the financial overhaul to rein in excessive swipe fees, but the rules set to go into effect in July are facing an all-out assault from big banks and card companies.
The country observed National Small Business Week in May (see the Presidential Proclamation). The Main Street Alliance marked the occasion by releasing its “State of the Small Business Nation – 2011.” This white paper includes a “Small Business Top Ten List” of concrete policy opportunities to level the playing field for small businesses and help them create jobs.
While pundits and politicians like to label policies “pro-business” or “anti-business,” as if there were one unified business interest, the reality is that policies that make winners out of some businesses make losers out of others. As Bruce Josten, the chief lobbyist of the U.S. Chamber of Commerce, put it, “You’re never going to have one hundred percent unanimity. Never. There is inherent tension… I laugh every day when someone calls and asks what does the business community think.” (1)
While Mr. Josten pointed to tensions between oil and gas companies, wholesalers and retailers, investment banks and retail banks – all big corporate players – his point applies even more so to the dynamics between big business and small business. While pundits and politicians like to lump all business interests together, the truth is that policies that benefit large corporate players very often tilt the playing field against small businesses.
In a cover letter to President Obama, senior administration officials, and congressional leaders on May 18, Main Street Alliance business leaders wrote:
Our members come from states across the country and a wide range of sectors, but we are united by a common set of values – small business values. We believe in what we do, we stand by our products and services, and we want people in government and corporate leadership who do the same. We stand for fair play and a level playing field. We stand for having each other’s backs. We believe America’s future prosperity depends on everyone contributing their fair share.
These small business values are what guide our business decisions and our commitment to advancing policies that fulfill the promise of an economy that works for all of us – small businesses, our employees, and the communities that sustain us.
(1) James Verini, “Show Him the Money,” Washington Monthly, July/August 2010, http://www.washingtonmonthly.com/features/2010/1007.verini.html
On May 19, Main Street Alliance members from Louisiana and Maine were joined by Senator Dick Durbin on a conference call highlighting the disproportionate impact of debit card swipe fees on small businesses. Rules limiting swipe fees, passed last year and set to go into effect this summer, are now under attack from the banking lobby, with an amendment under consideration to delay the rules from taking effect for up to 24 months.
Here are a sampling of quotes from speakers on the call:
Mary Noel Black, owner of The UPS Store at Citiplace in Baton Rouge, LA:
“This system is broken and small businesses are paying the price in constantly increasing debit swipe fees. Small businesses have the least leverage, the least ability to negotiate with the big banks and the card companies, so we end up with the worst contracts.
“Those who say they want to delay and study this issue, are really only paving the way for these much-needed swipe fee limits to die a quiet death. Every month of delay on the new swipe fee rules is another $1.3 billion bailout to the banks – delaying 15 months translates into another $15-20 billion gift to the banks, paid for off the backs of small business owners like me.”
Rita Moran, owner of Apple Valley Books in Winthrop, ME:
“Swipe fees are uneven, unfair and it’s absurd! This issue pits one business against another and the customers are caught in the middle. Every day I have customers come in, hand me their debit card and say they want to use it as a credit card because the banks told them to. This is divisive. Beyond the dollars and cents issue, this is a community issue.”
Senator Dick Durbin, Assistant Senate Majority Leader:
“The swipe fee issue is a very important issue for small businesses across America. These are tough times. I’ve heard so many speeches on the floor of the Senate – by both political parties – about how we need to stand behind small businesses because they are the job creators of America. Moving the new swipe fee rules forward is a key opportunity to do that.
“Last year, we got a bipartisan vote of 47 Democrats and 17 Republicans to set the Federal Reserve on the path to establishing reasonable interchange fees. Swipe fees account for $1.3 billion each month, the lion’s share of that going to the biggest banks on Wall Street. We want to end the price fixing by the card companies, end this rip-off of consumers and small businesses by making sure these fees are reasonable.
“The next two weeks are a critical moment for this issue as we wait for the Federal Reserve to announce the rule in the first part of June. We’ll get to look at the rule, dispel rumors about what the rule will do, and then we can move forward from there to implement the rule by the July 21st deadline and ensure fair treatment for all of our small businesses.
“I encourage small business owners in every state to be in touch with your Members of Congress and let them know that this is a critical issue for the growth and expansion of small businesses across America.”