Everyone knows how that old saying goes: everything is bigger (and better) in Texas. From our football teams to our barbeque to our colloquialisms, we’re proud of where we live and the example we set for the rest of the country. That same mindset extends to our communities, whose growth contributes to the economy, not just regionally but also nationally.
There are more than two million small businesses in the Lone Star state, representing nearly 99 percent of all Texan employers. This large number means small businesses are absolutely crucial to our fiscal performance, influencing everything from employment to home prices to consumer spending. Members of the Independent Bankers Association of Texas (IBAT) are proud to support these businesses and give them the tools they need to start up, expand and reach their goals.
However, a federal policy known as the Durbin Amendment set price controls on debit card transactions, limiting our ability to serve our customers. Even worse, this same policy has impacted small businesses’ bottom lines and their customers’ wallets, all so big-box stores can pocket an additional six to eight billion dollars each year.
This amendment to the Dodd-Frank Wall Street Reform Act placed a price cap on debit interchange fees, which merchants pay in order to authorize debit card transactions. These fees go towards maintaining the payments system’s infrastructure, including security improvements and providing customers with a variety of options to pay. Originally, debit interchange fees were based on the percentage of a total sale, which is beneficial for smaller stores selling lower-cost items, but the new formula is a flat rate. For the large retailers, this actually lowered their costs, while many small businesses actually had their interchange fees rise.
The billions of dollars transferred to retailers’ pockets have also added financial burden to local community banks, which have more financial liability to keep the payments system running now that many of the large banks and card networks have had their debit interchange revenues cut in half. Is it any wonder banks around the country, especially independent ones in Texas, have had to change free checking requirements - thereby reducing those eligible - and eliminate services just to make ends meet?
It’s clear that small business owners and their customers have gotten the short end of the stick, but it gets worse. Big-box retailers were supposed to pass on billions of dollars in savings to their customers by lowering prices-that was a promise made before the Durbin Amendment went into effect-but these stores never followed through. There is no evidence prices are lower. In fact, plenty of studies have confirmed prices are the same or higher.
It’s time to say enough is enough. In Texas, we work hard for our livelihoods, our small businesses and our great state. We can’t let a failed Washington policy continue to cause harm. Thankfully, there are already two of our very own taking a stand to put an end to this. Representatives Jeb Hensarling and Randy Neugebauer have both introduced legislation to repeal the Durbin Amendment and allow a competitive marketplace to do its job once again.
IBAT and community bankers across the state support both H.R. 5465 and the Financial CHOICE Act that will end this failed policy. We need to take a stand against this failed policy imposed by big-box retailers’ special interests and bring access to financial services back to all consumers.
Chris Williston is the president and chief executive officer of the Independent Bankers Association of Texas, the largest state community banking association in the nation.