Small-business owners aren’t fond of government regulations. We believe business works best in a market free of cumbersome impediments that hold us back from expanding and creating jobs.
It’s competition that should govern the free market, which makes companies more efficient and keeps prices fair. The free market, after all, made us the largest economy in the world.
Unfortunately, that’s not what we retailers face in our businesses.
Here’s why: Every time you swipe a debit or credit card to pay for something, the bank that issued your card takes a huge bite for processing the transaction.
The two major credit- and debit-card companies, Visa and MasterCard, have grabbed so much power that they can price-fix these “swipe fees” at absurdly high levels.
Six years ago Congress said “enough.” It told the Federal Reserve to make rules to open the debit-card market to competition.
Visa, MasterCard and the big banks, for instance, had tried to squash competing processing networks.
Visa just recently even used new technology it imposed on merchants at the checkout counter to trick customers into selecting only its processing services.
Without debit reform, the Federal Trade Commission wouldn’t have had reason to investigate Visa and embarrass it into scrapping its underhanded ploy.
Reform, in the form of the Durbin Amendment to the Dodd-Frank financial bill, also required banks to quit squeezing merchants on fees.
Even though it limited the fees to prevent the banks from taking advantage of merchants and consumers, the measured reforms still allow banks to mark up their swipe fees 500 percent.
And, for the first time, reform gave banks an incentive to compete. They can charge whatever swipe fees they like as long as they don’t use the price-fixed fees set by Visa and MasterCard.
This is starting to look and behave more like a free market. (And, by the way, only the 100 largest banks are subject to any of these rules. Your neighborhood bank or credit union is exempt.)
Yet the big banks, accustomed to years of gouging merchants and consumers, fought back in pursuit of their own narrow interests. In September they persuaded a small majority of the House Financial Services Committee to vote to repeal Dodd-Frank, and with it debit reform.
If debit reform is repealed, there goes the free market. We go back to something more like the old days of the robber barons who ruthlessly ran roughshod over other companies and people — only this time it’s the big banks and credit card companies.
Competition not only means lower prices for consumers: It also gives small businesses a fair shake (swipe fees are now retailers’ second-largest operating cost after labor, a crushing burden).
And perhaps most important, it creates jobs that can’t be shipped overseas.
In my business, gas stations and convenience stores, I employ 400 people at eight locations. As with almost every other convenience store, the banks take more in swipe fees than I earn in profits.
My company is sound — in fact, we’re opening a ninth location — but not all small businesses in Minnesota stand on such firm ground.
That’s why it’s so important to understand that even modest debit reform supported 300 jobs in the state in its first year alone, 2012, according to a noted economist, and saved Minnesota consumers more than $108 million.
Let’s face it: Minnesota’s been doing OK, but it could be better. The former chief economist of the federal Commerce Department studied our economy recently and found that over the last 15 years Minnesota has had only average economic growth.
And lately the unemployment rate has been edging up.
Do we really want to load down our small retailers with these outlandish swipe fees at a time when every job assumes even more importance?
That’s why people should tell their legislators in Washington we need a fair and free market for debit cards. We can’t afford to lose what progress we have made. The cost in jobs, hardships to families and small businesses, and the dent in our economy would be just too great.
And once we’ve kept the debit market free, we need Congress to take a hard look at the market for credit cards.
Steve Williams is president of Bobby & Steve’s Auto World.