As a state representative, I am fortunate to speak with New Hampshire business owners and residents about problems they are facing and to work with my colleagues to help ease their burdens. This includes identifying federal level issues trickling down to our citizens in the Granite State and impacting their daily lives.
New Hampshire is lucky to be rich with small businesses—96 percent of state employers are small businesses—and we rely on them for economic growth. When our Main Streets are thriving, we all benefit. Unfortunately, a 2011 federal policy that eliminated the interchange fee free market is putting undue stress on our job creators and threatening the local economy.
The “Durbin Amendment” as it is called set debit card fees at a flat rate, instead of a percentage of the total purchase. Some retailers have held on to these billions while placing additional financial burden on small businesses, who have much thinner or smaller profit margins than the big-box stores.
In fact, this new formula has unfortunately led to a rise in interchange costs for some small businesses. Because of this, as a customer, I’ve seen many mom-and-pop shops have no choice but to ban debit cards, even though they provide immense benefits to their businesses—and to customers. In our card-based economy, the convenience, speed, and security of accepting plastic is something small businesses cherish. Not only does it streamline their business, but it makes their customers happy.
A change in interchange fees isn’t the only burden placed on our small businesses. Many are also dealing with higher checking account “fees” due to a decline in “free checking” accounts. Since the Durbin Amendment went into effect, it is estimated that fewer than 40 percent of bank accounts are eligible for free checking, a 38 percent decrease from 2009 levels, as banks try to recoup the hefty annual revenue gap stemming from the interchange loss. Even so, the changes to “free checking” accounts has only offset a third of the banks’ losses. As if history hasn’t already proven otherwise, the Durbin Amendment further shows that “price controls” just don’t work. The nature of a “free market” is that it opens the doors for competition, helping to drive down prices and encouraging innovation.
It’s time to re-establish the “free market” and remove the competitive disadvantage placed on small businesses. The” free market” enhances competition and innovation, which is good for consumers, small businesses, and, in turn, the economy. Don’t you want to live in a place where (small) mom-and-pop businesses thrive?
Several congressional members have identified this problem and are working to help ease the burdens Americans around the country are facing. Passing H.R. 5465 would be one of the much needed steps that would repeal the Durbin Amendment and end harmful “price controls” by re-instating the free market.