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Commentary: Swipe fees hurting local businesses


Texas is known for its friendliness, delicious food, honesty, and of course, for everything is bigger and better in the Lone Star State. The grocery industry is no different. Grocers invest in the communities they serve, ensuring quality and that affordable food is readily available, while competing openly in a large industry every day to create good jobs and boost our state’s economy.

Texas retailers strive to keep their prices low by seeking out efficiencies in every aspect of their business and constantly negotiating lower costs. One area where they have never been able to negotiate their costs is in accepting credit and debit cards.

U.S. merchants pay nearly $80 billion annually to the banks and credit card companies in hidden acceptance fees, which is higher than anywhere else in the world. These hidden fees have stifled growth, driven up the costs of consumer goods and hurt small businesses for long enough.

In 2010, American consumers and merchants earned a hard-fought victory over escalating, uncontrollable hidden fees with the inclusion of the debit reform measures in the Wall Street Reform and Consumer Protection Act. These reforms brought transparency and competition into a market where fees were traditionally set collectively behind closed doors and without regard to the costs imposed on American consumers and Main Street retailers.

For the first time small businesses can now see and know exactly how much they will be charged for a debit transaction from one of the covered institutions. This was an essential first step to move America’s electronic payments system toward a truly open and free market.

Unfortunately, these pro-competition reforms are now under assault in Washington.

Texas’ own Jeb Hensarling, chairman of the Financial Services Committee, is expected to introduce legislation that would repeal Wall Street reforms, along with the successful debit and swipe fee reforms. The mega-banks are spending millions of dollars to convince Congress that competition is bad for business and should be repealed. Opponents of competition argue that small banks and credit unions have been harmed by these reforms. However, the argument has a giant hole in it and the facts tell a much different story.

Just last year the Federal Reserve studied how the small banks that were exempt from the regulations, those under $10 billion in assets, were faring under the reforms. The study concluded that “…the volume of transactions conducted with cards issued by exempt banks grew faster than it did for large banks.”

The report further found that interchange revenue for exempt banks continued to rise for small banks. The study concluded that “…the evidence does not support the claim that competitive forces have effectively imposed the interchange fee ceiling on small banks…”

At home here in Texas, our local credit unions have also been able to capitalize on their ability to compete with the giant banks, which has been good for consumers.

The facts are clear, not only have the reforms worked, but 98 percent of banks and credit unions that were not covered by them have actually been able to use the debit reforms to their advantage. It is remarkable that at a time when Congress should be focusing on fostering competition, growing our economy and enabling job creation they are instead considering repealing reforms that have had the opposite effect.

Congress needs to reject this blatant assault on Main Street Texas businesses and instead stand up for competition and our job creators. Texas retailers urge Chairman Hensarling to keep debit and swipe fee reforms that have proven to work and include them as part of the Choice Act; an otherwise favorable effort to reform our nation’s financial services industry.

Kelemen is president and CEO of the Texas Retailers Association.



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