Recently, a bill has been introduced in Washington, D.C. that will change the way credit card transactions are processed. If this move is successful, it will hurt our small businesses, consumers and ultimately our economy.
I am talking about Illinois Senator Dick Durbin’s efforts to establish routing mandates on credit card transactions. Sen. Durbin is pushing to establish these unneeded, and unwanted, routing mandates to save large box retailers money. However, those savings will not be passed on to consumers. In fact, consumers are not even mentioned in the bill, which has been dubbed the Credit Card Competition Act of 2022.
The bill, if passed, will hurt consumers because it will cost the banks and credit unions that issue the credit cards billions of dollars. Those losses will have to be made up somewhere, and in this case the issuing banks and credit unions will be forced to cut services to their consumers.
Free credit cards will be eliminated, and everyone will be charged an annual fee. Issuing banks and credit unions will also be forced to be much more selective on who can obtain credit. They will also be forced to raise interest rates on consumers.
All these factors will make credit more difficult to obtain and it will reduce the number of credit cards in circulation. That will hurt businesses around the state because people spend more when they have access to credit. This will in turn damage our economy at a time when we can scarce afford it.
Counties in my district are dependent on small businesses as is the entire state. According to the U.S. Small Business Administration, nearly 99 percent of the businesses in West Virginia are considered small businesses.
Small businesses operate on a much smaller profit margin than large box retailers. For them, every penny counts. Reducing the number of credit cards in circulation will lower the amount of money spent in these stores and restaurants.
This could hurt a small business’ ability to grow and expand. It could keep them from brining on new employees. It could even cause some to close their doors completely.
We cannot afford to allow this to happen. Not only do the small, mom-and-pop owned businesses power our state’s economy and employee tens of thousands of people around West Virginia, but they are also the lifeblood of our communities. The small businesses are the ones that donate to the local youth sports teams and to churches. They help us keep our communities vibrant.
This bill will also impact cyber-security. The proposed routing system will allow merchants to select the system to move the funds from the credit card purchase. Not surprisingly they will select the least expensive option, which is often the least secure. This is not something that should be done when online security is becoming such an issue.
The Credit Card Competition Act will also destroy the current credit card rewards program. Since issuing banks and credit unions will lose billions of dollars, they will eliminate credit card rewards points. These are the same rewards points that are utilized for stays in hotels around the state. This will ultimately hurt our tourism industry.
I hope our leaders in Washington, D.C. recognize the impact that the Credit Card Competition Act will have throughout our economy. It is a losing proposition and I ask that they oppose this bill.
Bio: Senator Jack David Woodrum represents the 10thSenatorial District. He is Chairman of the Commission on Interstate Cooperation and Vice Chairman of the Agriculture and Rural Development Committee.   Â