A New Merchant Group Voices Opposition to a Bill Aimed at Credit Card Acceptance Costs

The political battle over the Credit Card Competition Act has heated up as the Small Business Payments Alliance (SBPA), a recently formed merchant trade group, has come out in opposition to the proposed legislation. The group argues that, if passed, the CCCA would harm small businesses.

The SBPA, which held its first gathering in Washington D.C., this week, says it plans to make Congress aware of its position before the CCCA comes up for a vote. Supporters of the CCCA, which is sponsored by Sens. Dick Durbin (D-Ill) and Roger Marshall (R-KA), have publicly stated they expect that vote by year’s end.

While many merchant groups have lobbied in favor of the CCCA, the SBPA’s position is that, if passed, the bill would have a detrimental impact on businesses “by circumventing the existing free market with a government routing mandate that dictates which processing networks banks can accept, without regard to security or quality.”

The SBPA also argues that the bill would benefit only large merchants and businesses with large card volumes as they can leverage that volume to secure lower card-acceptance rates, while small businesses, which lack the transaction volume, can’t.

In a nutshell, the CCCA would mandate that, if Visa Inc. is one of the network choices offered by issuers to merchants, the other choice can’t be Mastercard Inc., and vice versa. Offering merchants a choice of networks would allow for competition among the card networks that would lower card-acceptance costs, supporters argue. The proposed bill would apply to financial institutions with $100 billion or more in assets, which are generally the largest card issuers. These banks control better than 90% of the credit card market.

“If Congress implements these massive changes to our electronic payments system, it’s going to hurt my business and the community we serve,” Ken Katz, co-owner of Buenos Dias Café and La Bodega, two Atlanta-based restaurants, says in a statement. “Big retailers are going to benefit from the Durbin-Marshall bill, but a small business like mine is going to be collateral damage. We just don’t have the infrastructure or the capacity to take advantage of this policy like these mega retailers. We need our elected leaders to stand with small business.”

The SBPA could not be reached for comment for this story.

While the emergence of the SBPA suggests there could be a divide in the merchant community over the CCCA, other trade associations supporting the bill counter there is widespread merchant support for the bill, particularly from small sellers.

“Small businesses are hit the hardest by swipe fees because they pay the highest rates and have the fewest resources to do anything about it. We hear from them every day, they have come to repeated merchant fly-ins in Washington and have held countless meetings with lawmakers in their home states,” Doug Kantor, an executive committee member at the Merchants Payments Coalition and general counsel for the National Association of Convenience Stores, says by email. The MPC has lobbied hard for the CCCA.

“Hundreds [of merchants] have signed letters to Congress calling for action, and their concerns have been voiced in scores of op-eds and letters to the editor across the country,” Kantor notes. “The new alliance is clearly a front for the card industry and is not the voice of American small businesses.” The new group is “a project of the Electronic Payments Coalition,” the SBPA noted on its Web site. The EPC, which represents financial institutions and payments networks, has lobbied against the CCCA.

The MPC also notes that, in June, a letter signed by 1,980 merchant companies was sent to Congress in support of the CCCA. The letter argued that passage would bring needed relief to retailers on card-acceptance fees by requiring that Visa and Mastercard compete with other networks for merchant and bank business.

Even if there is a divide within the merchant community over the CCCA, payment experts doubt it runs very deep. “Small businesses instinctively are more pro-market and more likely to oppose government intervention in markets,” Eric Grover, proprietor of consultancy Intrepid Ventures sys by email. “Larger businesses of all stripes are more likely to be comfortable lobbying Washington and the states for advantage.”