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Testifying Before Congress on Behalf of Small Businesses (like you).

By
Real Estate Agent with 1st Action Real Estate

Lately I've been learning about the Durbin Amendment to last years Dodd-Frank Wall Street Reform and Consumer Protection Act. I've got my doubts that the bill really does much of either but the Durbin Amendment has stirred up a lot of controversy. Why am I learning this? Well, on behalf of the Southwest California Legislative Council, an advocacy group for businesses in our region, I will be testifying before Congress on Thursday regarding the impact this amendment has on small businesses. I'll be joining about 90 folks from around the country, primarily small business owners, in a series of meetings and press releases encouraging our Congressional leaders to stay the course on this and not buckle to the banking lobby. Yeah, that could work. 

If you're not familiar with Durbin - in a nutshell it regards interchange fees or the so-called 'swipe fees' that get charged every time you pay for something with a credit or debit card. Currently this unregulated segment of the banking industry is a cash cow primarily for the two companies that control 80% of the market, Visa & Mastercard, and their 4 or 5 big issuing banks.The Durbin Amendment requires the Fed to 'establish standards for interchange fees that are reasonable and proportional to the cost of processing debit card transactions.' In addition, card networks like Visa & Mastercard, which set the fees for their issuing banks, will not be able to prevent retailers from encouraging the use of cheaper forms of payment through discount or minimum purchase requirements for credit cards. 

swipe

Currently the swipe fees vary all over the board (there are over 200 categories designed to milk every last nickel from a transaction), but let's say they average 2% of a transaction plus around $0.29. The Fed has until next month to make their proposal  official but in December they released a preliminary study showing that they believe the 'reasonable and supportable' fee would be around $0.12. TOTAL! That would equate to a reduction of about 73% for most merchant transactions - costs which are either borne by the merchant, passed along to all of us in the form of higher prices or some combination thereof.

As you might imagine, the banks are howling like raped apes about this. The end of the world as we know it! Chaos in the streets! Women and children rioting! The end of all kinds of freebies from your card issuer! New charges for checking, saving, breathing. It'll be a horrorshow! Hyperbole as only professionsl hyperbolists are capable. 

And I'm sure there will be some repercussions. The banks will not take the potential  loss of up to $50 billion a year in free money lieing (lying?) down.

But the fact is it's a burden on small businesses that have to remain competitive. It also costs jobs. The association I work for paid over $47,000 last year in credit card charges. And we can't just pass that along to our members. Realtor® fees are high enough and you're not making that much to begin with. But that's at least one full time employee that will not be hired and we're just small potatoes. You can only imagine the final cost to many retail establishments, restaurants or the grocery industry where profit margins are notoriously slim to begin with.  It's your smaller local businesses that get hit the hardest with this regressive fee. Large retailers like Walmart pay the fees but are in a position to negotiate a much reduced swipe.

The bill passed last year with bi-partisan support over-riding the banking lobby. But with the implementation date getting closer and closer the banks have ratcheted up their attack and are running a full court press on Congress to defeat this amendment. But small businesses and our customers need this relief now. I don't know how this will turn out and it is making some strange bed fellows, but it sure feels good to root for the underdog.

 

If you have personal experience on what these fees cost you or your business, please pass them along - and if you'd like to read more...

Comments (10)

Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

 

 Congratulations - This post is now featured in Silent Majority of The Active Rain Network!

Mar 07, 2011 01:17 PM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Quick work. Thanks Nicholas.

Mar 07, 2011 01:20 PM
Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service
Just trying to do my part in the scheme of things -
Mar 07, 2011 01:37 PM
Bob & Bonnie Horning
Mount Joy, PA

Gene, best to you and thank you on behalf of my small business. We paid close to $16,000 in order to take people's CC info this past year. We've found a different vendor and actually negotiated our rate a little lower than the previous years. Then lately we had a customer totally peeved that we didn't take AmEx! They hit us for about twice as much to use. He ranted for a while on how much this card saves him and all the kick backs he gets for using it... not on my back though. Last year, we came very close to deciding to not take CC anymore. We still came to the conclusion it was better to have our payment guaranteed and on time than the old check is in the mail system, even if it costs us. We have some who won't advertise without us taking it... soooo the lesser of two evils. Go get em.

Mar 07, 2011 01:48 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

We know that Credit Card accounts with Visa and Mastercard have hefty fees to the merchant.  However, the Bank Cards (Debit) do too. 

My gunsmith is not shy and told me that when I use credit, it costs him 5-6%.  When I use Bank Debit, it costs him 3%. 

I pay him in cash or check.  He's one gentleman I want to keep happy.

Mar 08, 2011 12:24 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

There's a difference between what they call on-line debit and off-line debit. On-line is when you use your pin and that's usually cheaper. Off-line is when you use it like a credit card and sign a slip - that's more expensive. Under current reg's, merchants can be dropped from the system for suggesting ( or even accepting) a cheaper method of payment. It's a licensed monopoly.

Any of my other AR Peeps with stories to relay I'll be happy to incorporate. That's the strength of our grassroots and I know many of you have horror stories. Thanks.

Mar 08, 2011 02:39 AM
Kevin Robinson
Twin Falls, ID
Fractional Developer

Gene- Tell them which way is up my good man. Go get 'em.

Mar 08, 2011 02:43 AM
Bob & Bonnie Horning
Mount Joy, PA

I like dealing with my local Agway store, G&G Feed in Manheim. They don't have a single computer on the premises, everything is still on paper and I have to pay cash or check. No plastic, no credit. I don't mind one bit.

Mar 08, 2011 08:12 AM
Dale Terry
Yadkinville, NC

The best way around all of this is to use cash, but banks have made it hard to have any.

Mar 08, 2011 10:24 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Cash is still king - but it is tough to use in some situations and the credit card companies have been very adept at encouraging the switch. Heck, as recently as 4 years ago as much as 80% of transactions were still paid for by check. It's been months since I wrote a check. Some merchants don't like you using cash either because when you do, statistically your purchase will be smaller or, if you don't have the money to buy the item God forbid you might actually NOT BUY IT. Imagine that. Downright un-American.

Mar 08, 2011 10:57 AM