Managing Credit and Debit Cards – What is the Right Answer

Credit and debit cards are my lifeblood. These cards work beautifully, and need no federal intervention or meddling.

A couple of weeks ago marked the three-year anniversary of the Senate’s passage of the Durbin Amendment, part of the Dodd-Frank Act of 2010. Durbin’s amendment prevented banks from charging more than 21 cents per debit card transaction ((plus 0.05% of the transaction). Before Durbin, banks were charging roughly 44 cents per debit card transaction. Instead of allowing market forces and competition to bring debit card fees down, in the aftermath of the market crash, congressional leaders thought that a price cap would be the right answer for consumers. Upon its passage, champions of the Durbin Amendment declared a victory for the American people. However this “victory” for consumers never came to fruition. Rather, the result of the Durbin Amendment has been higher fees to consumers in other areas, such as bank checking accounts, forcing many consumers out of banks altogether. So tell me, how was the Durbin Amendment the “right answer”?

Now several large retailers and organizations including those in my own industry, bar and restaurant merchants with the National Restaurant Association, are trying to use their weight in a fight in the name of “consumers,” this time over credit card fees.

Last summer, MasterCard and Visa agreed to be part of a settlement of a class action lawsuit brought in 2005 by retailers to reduce their costs for accepting credit cards. The settlement provides merchants with more control than ever over what they pay to accept payment cards, and allow consumers to benefit. May I caution my Members of Congress, respectfully, to ignore the pleas of certain merchants and national associations, including those in my own industry who oppose this settlement. Should these normally well intended folks say credit and debit cards need some sort of legislative action, please tell Congress to just ignore this and stick to their knitting — the real issues of the day.

My company, Thomas and King, owns and operates 94 chain restaurants in five states with 5,700 employees. Taxes, health care, immigration — these are real issues that matter to real people like us.

I hope we learned from our mistakes from the Durbin Amendment to try to legislate a solution to a problem which should be solved by the free market. Credit card fees go to increase services for consumers and merchants, such as better payment options, faster service and better protections against fraud. Federal intervention only serves to drive a wedge between consumers and merchants. Now I hear that states are banning retail outlets from surcharging for credit cards. Good for them. But it’s a shame states have to fool with this. What’s next, itemizing the light bill on guest checks for the anti-coal crowd?

Having been in local office, hearing more than a few “off-beat” non-priority priorities suggested, one can only imagine what our federal officials sift through in the messages from home. Mine, however, is simple. Credit and debit cards are just fine on this end, out here in middle America. The subject never comes up. It need not come up for you, either. There is enough important work to do. My direction to Congress – it need not come up for you, either. Any further interference in the private marketplace will only be more damaging to the well-being of American consumers and our economy.

Free market economy – that’s the right answer.