Six years ago, Sen. Dick Durbin rammed a misguided law down the throat of American businesses to regulate the cost of processing debit-card transactions. Durbin slipped the provision into the Dodd-Frank financial regulation bill on behalf of big box retail lobbyists whose clients wanted to pad their bottom line. At the time, these big chains promised the law would lower prices on a wide range of goods and services, everything from a Big Mac to a stapler.
Those savings never materialized. In fact, research by the Federal Reserve Bank of Richmond shows prices have actually gone up for many smaller transactions, including dinner for two at McDonald’s and a quart of milk at the local convenience store.
Instead, the law has been a windfall for the retailers who lobbied so hard to jam it into the Dodd-Frank in 2010, over the objection of one of its liberal authors, former Massachusetts Rep. Barney Frank. The ill-conceived legislation has generated an additional $6 billion a year in revenue for those same retailers, according to the same Richmond Fed study.
Now, big-box retailers want to go even further. Illinois Sen. Dick Durbin, who authored the legislation setting price caps on debit-card transactions for the retailers and their lobbyists, recently penned an op-ed with Vermont Rep. Peter Welch to argue that Congress should regulate the technology retailers use to process electronic payments, expanding the government’s interference in one of the most basic commercial transactions of the 21st Century.
Durbin and Welch want Congress to dictate what systems stores use to process the sale of an apple or a new Apple computer. In their telling, the private sector needs politicians to tell banks, credit unions and the card networks how to ensure the convenience and security of debit- and credit-card transactions.
Their argument ignores the complex infrastructure that makes a seemingly simple transaction work as seamlessly as it does. No one spends more time focused on the privacy and safety of electronic payments than the financial institutions and card companies that have invested billions to build – and constantly upgrade – the vast global network that can process trillions of digital transactions each year.
Why else do more Americans trust banks and credit-card companies to develop new payment technologies over retailers or the government?
Big-box retailers and their lobbyists have echoed Durbin and Welch on the need for the government to mandate what type of technology they use to process these transactions. They blame the banks, credit unions and card networks for a spike in fraud and warn of some laughable conspiracy to provide consumers with the least-secure technology.
This, of course, is just another distortion of the truth to distract from the merchants’ failed promise to lower prices on everyday items and their own failure to protect their customers’ personal information. They are trying to change the conversation because the facts of this debate are working against them.
The electronics payments industry is right in the middle of its latest costly transition to make debit- and credit-card payments even safer. The new chip technology being implemented all over the U.S. adds another layer to shield consumers from the fraud and data breaches that have become commonplace at many retailers. These investments protect cardholders, but also the merchants who process these payments.
Big-box retail lobbyists are trying to open another front in their special-interest crusade because the law they fought for has failed to achieve its stated goal. And they are so desperate to squeeze more money out of their customers that they are willing to punish an industry that makes the digital economy possible. These calls for further government regulation of the payment-card industry threaten to hamper efforts already under way to improve the speed, convenience and security of credit- and debit-card purchases.
In the end, consumers are the ones who would really lose.