When introducing his amendment, Senator Durbin highlighted how he first became aware of Visa and MasterCard’s stranglehold on the credit card market when the owner of his favorite restaurant complained. It’s the same story you’ll hear from any small business owner across the country: they’re non-negotiable and out of control. Senator Durbin’s amendment made radical changes, shifting the balance of power from the big banks and credit card companies to small businesses, creating a much more level playing field.
It may sound surprising, but before the Durbin amendment passed, businesses – both large and small – were threatened by punitive actions if they offered customers discounts for paying with cash or checks. In addition, although you may have seen them in store windows, Visa and MasterCard’s draconian rule book prohibits small businesses from setting minimum transactions for consumers using credit cards – even if the swipe fee is so high that the merchant loses money when a transaction is made! Yes, Visa and MasterCard force small business to lose money. Not a sound business model – unless you’re Visa and MasterCard.
However, with the Durbin amendment, small businesses are now empowered to offer consumers lower prices if they use cash instead of credit. The Durbin amendment also allows small businesses to set a minimum of a $10 transaction, ending the ludicrous scenario whereby a small business would lose money when selling a small dollar ticket item. More importantly, the Durbin amendment instructed the Federal Reserve to regulate debit card swipe fees so that they are “reasonable and proportional” – a move that could see debit card swipe fees falling by as much as 80 percent.
And yet, the big banks and the credit card companies, long used to milking small businesses, are putting up a fight, spending tens of millions of dollars on a smear campaign to kill these commonsense reforms. Anyone that’s witnessed the actions of the big banks over the last few years will be well aware that they’re institutions hardly known for their transparency and fairness – and the debate around swipe fees is most certainly no exception.
When the Senate took action last May it was a landmark moment, proving that despite the problems that exist in Washington, it’s still possible to get bipartisan reforms passed that benefit both the American consumer and small businesses. It’s now up to our elected officials to resist the cries from the banks and implement these bipartisan reforms – as passed and on time.