In September, the House Financial Services Committee voted to approve legislation that would increase swipe fees that restaurants and other retailers must pay to process a debit card. These fees represent one of a restaurant’s highest costs after labor and food. This legislation, the Financial CHOICE Act, is being pushed hard by big banks to boost their profits at the expense of Maine small businesses.
Only one Republican, Rep. Bruce Poliquin, had the foresight to see the impact this bill would have on you as consumers and Maine’s businesses and voted no. I spoke with the congressman after the vote, and he told me “it was the right thing to do.” Poliquin stood on the side of small businesses and should be thanked.
The CHOICE Act would repeal swipe fee reforms that have brought fairness and competition where there was none before. In the years leading up to 2010, the cost of accepting a debit card skyrocketed from zero cents to an average of 44 cents per transaction — an increase of more than 4,300 percent. Now, with reform, the costs must be “reasonable and proportionate” to the costs that a bank incurs to process the transaction. Reform also has ensured competition in this area allowing merchants at least two different options for processing a transaction. Previously, a merchant only had one choice, and when you only have one choice, the prices always seem to go up.
Those pushing for repeal — the biggest banks in the United States — are quick to claim that restaurants and merchants are somehow pocketing the savings from reform and are not passing it along to consumers. This claim is false. There are many factors beyond the cost of debit interchange that must be taken into account — the cost of food being just one. Between 2009 and 2014, average wholesale food prices were up roughly 25 percent, according to the National Restaurant Association. Rising labor costs along with an ever-expanding regulatory creep over the restaurant industry continue to be a factor in pricing decisions as well, but not just in restaurants.
But we should not forget that businesses continue to pay inflated interchange rates on all other debit transactions and all credit card transactions, in which there is no relief whatsoever from the effects of the reign of the card brands
Lastly, we should remember that debit swipe fee reform applies to card issuers with assets above $10 billion, of which there are about six in the nation, and all others are exempt.
Debit swipe fee reforms have been good for restaurants and good for our guests. Congress should follow Poliquin’s leadership and stop this legislation from moving forward. He repeatedly has stood with Maine’s small businesses and with the people of the Maine.
Michael Carney is a member of the board of directors of the Maine Restaurant Association and National Restaurant Association.