Interchange fee caps
should be rejected
There are a slate of progressive proposals circulating in the U.S. Congress that would alleviate the worst impacts of the pandemic-induced recession, such as the American Rescue Plan and the American Jobs Plan. Unfortunately, amid all these great progressive plans, big-box stores such as Target and Walmart are lobbying Congress to add price controls to our electronic payment system. As we have seen in the past, these policies will harm Virginia consumers — while we’re recovering from the worst economic year in our recent history.
Ten years ago, Congress passed a law to cap interchange fees, or “swipe fees,” on debit card transactions. The law was intended to help consumers but in reality it helped huge retailers secure a $90 billion payout that they did not use to lower their prices. The Federal Reserve Bank of Richmond found that 98% of companies either raised prices or kept them the same after the cap.
When banks lost billions in interchange fee revenue, they passed these losses onto consumers by raising account minimums, adding new fees and cutting free checking. Research from the University of Pennsylvania found that consumers lost $3 billion each year from debit controls.
Now, these same massive retailers have their Washington lobbyists trying to squeeze even more money out of consumers by extending the interchange fee cap to credit cards. Banks possibly will make up their lost fee revenue by cutting credit card rewards programs, raising fees and interest rates, and limiting credit access by raising credit standards. This would transfer an estimated $40 billion to $50 billion a year from consumers to big corporations, and kick 10 million to 15 million low-income and minority consumers out of the credit system.
Virginians already are footing the bill for big-box retailers like Amazon, whose headquarters in Arlington is set to cost more than $1 billion in taxpayer dollars through 2038. Virginians have given big corporations enough. Virginia’s leaders should reject any attempts to transfer billions away from everyday people and into the pockets of wealthy corporations.