The following content is sponsored by the Electronic Payments Coalition.
It’s hard to write legislation that would make every average American worse off. It’s even harder to pass. But that’s precisely what the number two Senate Democrat Dick Durbin (D-IL) aims to do with his new credit card routing legislation.
In what’s become a white whale for one of the most senior members of the Democratic Party, Sen. Durbin recently reintroduced legislation that would expand Dodd-Frank debit card routing mandates to credit cards. It’s been on his wish list for over a decade, and while it might not sound like a big deal, a closer look reveals that Durbin’s whale would sink America’s Main Street faster than an orca on a Spanish fishing boat.
The bill in question would redirect revenue away from credit card fraud protection, consumer rewards programs, and community bank funding and put it right into the pocket of big box retailers like Amazon, Target, and Walmart. (I’ll give you three guesses as to whose lobbying for the bill).
It’s why some are calling this bill the Big Box Bait and Switch.
The revenue for these programs comes from the interchange transactions on purchases one makes with a credit card (usually 1-2 percent). Currently, a consumer chooses what network they want to use by the card they select — if you pay with a Visa, the merchant has to use Visa’s network. But this bill would strip consumers of that right and give merchants the power to put a purchase through networks that don’t offer perks to cut costs.
It’s safe to say that consumers will suffer a significant loss if the bill is passed.
Not only would you be more likely to experience fraud, but you’d be on the hook for it. Local banks that issue the cards pay for fraudulent purchases through interchange funding. That goes away if the network processing the payment is some dinky operation not connected to the card issuer. Additionally, consumers would lose out on reward points and cash back — all so big box stores can pad their already ludicrous profits.
It’s essential to call out big box stores because they’re the ones who benefit from this bad policy long-term. Ultimately, this bill would hurt everyone on Main Street.
At first, small businesses might find cheaper options; but before too long, they’ll start to feel the pain as well. Consumers will spend less without incentives to use credit cards, and that’s going to mean a drop in revenue, which, if you can’t stomach a 1-2 percent transaction fee, is going to be way worse. With the local banks that fund small businesses also getting hit financially, it will mean less capital to fund Main Street America, increasing consumer reliance on big box stores.
It’s why seemingly every group representing local banks and credit unions has come out in opposition to the bill, and why those who care about small businesses know that this bill is a Big Box Bait and Switch.
And yet somehow, Republican lawmakers have signed on to join him.
Sen. Durbin has convinced Sen. Roger Marshall (R-KS) and J.D. Vance (R-OH) of the lie that this bill helps all businesses. But as listed above, this obviously isn’t true. Hopefully, these senators come to their senses before it’s too late.
