Credit card companies are squeezing small businesses—and Congress

By: Paul A. Miller, Workplace Solutions Association, legislative counsel

card companies on consumers who use a credit card to purchase items.

Some call this a cost of doing business. Others call it a monopoly that has gotten out of control. I like to think of it as the neighborhood loan shark who you borrow money from. You don’t just repay the principal; they whack you with ridiculous rates for each day the money isn’t repaid. The difference is, with credit card companies, it’s legal. They don’t break your legs if you don’t repay; they ruin your credit score. Which can be about the same level of pain.

Credit cards are a blessing and a curse for small businesses. They make it easier to order supplies, inventory and just about anything else a small business needs. Credit cards also come with some perks, I guess, in the form of airmiles, cashback and other rewards. But they also come with pages of fine print that can literally nickel and dime a small business to death.

We’ve all heard the slogans and seen the ads in which credit card companies tell us how great they are. Here are some examples of the slogans that credit card companies use to reel us in: l “Chase Ink Business Cards: The Perfect Partner for Your Small Business.” l “Chase for Business: Built to Help You Grow.” l “Visa: The Way to Pay, for Small Businesses Today.” l “American Express: Don’t Do Business Without It.”

They are all catchy; and when they appear on the TV screen, they become even more appealing. But what the credit card companies aren’t telling you is that they are raking in billions off your sales. Their ads make it sound like they care about your business; when in reality, they need you to believe this, so it feels less painful each month when they take their cut. They don’t just get you once; they get you on all fronts. First, they get you with their interchange fees—the charges paid by the merchant’s bank to the cardholder’s bank for each transaction. Then there is the assessment fee, which is imposed by the credit card company on transactions processed on its network. Then you have the processing fees, which are charged by the credit card processors to the merchant for handling the transaction. Finally, you have the mark-up, or what I call the “because we can” fee—an additional fee charged by some credit

I’m not telling you something you don’t already know. But what you might not know is there is a growing movement across the country and in Congress to finally fix this problem for small businesses. Over the past two Congresses, key members of Congress from both sides of the aisle have been pushing legislation that aims to lower credit card processing fees by increasing competition among credit card processors. A grand goal, you might say; but with the power and money behind the credit card companies, you might also be thinking “Not a chance this will get passed.” In the past, you would have been right. Up until recently, even I was a skeptic. However, things are starting to break a bit in our favor—or are at least scaring credit card companies into believing this has a shot of becoming law.

The Credit Card Competition Act (S. 1838/ H.R. 3881) would require banks with more than $100 billion in assets to process electronic credit transactions on no fewer than two affiliated networks, one of which must be outside of Visa’s or Mastercard’s network. This change would be a big win for the small business community. When we band together, we can compete with the large corporate giants. The playing field will never be level, but we can use our numbers to win this battle—and that is exactly what we are doing.

The legislation prohibits credit card issuers from restricting the number of payment card networks on which an electronic credit transaction may be processed. Specifically, the Board of Governors of the Federal Reserve System must prohibit certain credit card issuers with assets of over $100 billion from restricting the number of networks on which credit card transactions may be processed to one network, two or more networks operated by affiliated networks or persons, or the two networks with the largest market share of credit cards issued.

Additionally, credit card issuers will be prohibited from imposing certain limitations on the routing of electronic credit transactions, such as through penalties for failure to meet a specified threshold of transactions on a particular payment card network. The board must also provide for the designation of payment card networks that pose a security risk to the United States or that are owned, operated or sponsored by a foreign state entity.

Under the Credit Card Competition Act, the Federal Reserve would issue regulations within a year ensuring that banks in four-party card systems with assets of over $100 billion cannot restrict the number of networks on which an electronic credit transaction may be processed to fewer than two unaffiliated networks, at least one of which must be outside of the top two largest networks.

To help us move the needle, the Workplace Solutions Association (WSA) has joined several industry coalitions which are united in their commitment to ensuring this legislation reaches the president’s desk this year. Our first shot was when Sen. Roger Marshall (R-KS) offered an amendment to the recent National Defense Reauthorization Bill in the form of S. 1838. That strategy sent shockwaves across the credit card industry. Every credit card lobbyist scrambled to Capitol Hill to lock down votes in opposition to the amendment; you couldn’t walk down a corridor on Capitol Hill without bumping into a lobbyist representing a credit card company. But that was not the case for the small business community—not because this isn’t important to all of us, but because our small businesses are scattered all over the country and can’t just turn up in Washington to fight an amendment of this magnitude without more advance notice. And even then, the cost of doing so can be prohibitive. That leaves the fight to those lobbyists representing major trade associations. We are good; but I have to admit, battles like this become challenging because of the deep pockets of these corporate giants. Not impossible, just challenging.

When push came to shove, we lost this round. Sen. Marshall withdrew his amendment on the promise given to him by Senate leadership that he would get a floor vote on S. 1838 this year. That may not sound like a big deal, but it is. Leadership could have just walked away from this issue, and it would have died. Instead, we got half a loaf, as they say in Washington. This commitment now gives us more time to educate those members who are sitting on the fence. More time gives us the opportunity to mobilize more small businesses across the country in every congressional district and state. With Congress adjourned on a six-week recess, we can use this time to deploy true grassroots tactics in every state. This is our opportunity to share with members of Congress and the public just how greedy credit card companies have become. This is our chance to use the words of the credit card companies against them. The credit card companies have said they will spend whatever is needed to defeat our legislation. That tells you just how much money they are raking in from your business each year.

I won’t to lie to you: this remains an uphill battle. We are outgunned and outfinanced. But that doesn’t mean we can’t win. Just look back on what people previously said about the Big Box stores: they said we were outgunned and outfinanced then too, yet we won those battles. We can do the same here. The difference today is that we have joined forces with other small business trade groups, which has grown our grassroots army to a point that has the credit card companies worried. The difference is the belief that this can get done.

When Congress reconvenes in early September, the race to get this bill floor time in the Senate will be a full court press by both sides. We are not taking time off this August like Congress. We are continuing to work the phones, our members and congressional staff on the importance of this issue. Small business took a beating during COVID-19. Our large corporate counterparts were allowed to stay open while states shut so many small businesses down. This legislation will not only help small businesses recover from a global pandemic, but will break up a monopoly and require competition in the credit card processing system. Competition is what this country was built on. It’s what allowed small businesses like Microsoft to become corporate titans. The same goes for credit card companies.

We aren’t asking for some competitive advantage. We are asking that more companies be allowed to compete for our business. We tell consumers that competition is good, as it offers them more options for their dollars. Why shouldn’t the same apply to small businesses, which are the job creators in this country? If you have a