Increase Swipe Fees Regulations Do Not Benefit New York's Small Business Community

November 10, 2021

by Lourdes Zapata

According to Eater New York, more than 1,000 NYC restaurants have shut their doors for good since March 2020, and the list keeps growing. Every day, more

restaurants and other beloved local businesses are forced to close due to the relentless COVID-19 pandemic.

In the Black and Latino community, we’ve seen worse economic downturn than the national average.

Research from Small Business Majority earlier this year discovered that Black and Latino small businesses were more likely to temporarily close or consider permanently closing their businesses than their white counterparts. Many were forced to take drastic actions like laying of employees, cutting employee hours or reducing wages.

It’s clear that Congress needs to focus on helping our small businesses out of this crisis, which is why I was glad to see that President Biden included special aid provisions for minority businesses in the American Rescue Plan. Other included programs like the Paycheck Protection Program and the Restaurant Revitalization Program are the types of progressive policies I hope to see more of.

Yet while some in Washington are doing the work to help us, others have chosen instead to cater to big corporations. In the coming months, massive retailers like Amazon and Walmart are trying to push through harmful financial proposals that will alter our credit market and shift $40-$50 billion annually from consumers and small businesses to big retailers.

The concept of adding damaging regulations to parts of our electronic payment system is not new. Years ago, these companies were actually successful in pushing through routing mandates and price controls on debit card interchange fees as part of Sen. Durbin’s (D-IL) amendment to the Dodd-Frank Wall Street Reform Act. Interchange fees, often referred to as “swipe fees” that retailers pay to process credit and debit transactions, were capped at a flat rate of 22 cents instead of a small proportion of the transaction total.

Congress passed this amendment on the grounds that it would help everyday people and our small businesses, assuming that when retailers saved money on interchange fees they could lower their prices for their customers.

Instead, big retailers gained an extra $90 billion in revenue from the Durbin Amendment, while either keeping prices the same or raising them.

Even worse, big retailers may have fared well but small businesses suffered. When banks lost billions of dollars in interchange fees, they took drastic measures to regain their lost funds like charging the full interchange fee cap on every single transaction that retailers processed, no matter how small. For big retailers that sell tons of goods in large quantities, this was great. But for local New York businesses that rely on small transactions, many saw their small-ticket debit fees double or triple from what they paid before Durbin’s amendment.

The Bronx is home to approximately 27,000 small businesses with some of the largest commercial districts in the city. The South Bronx for one is home to many

minority owned small businesses with more than 350,000 daily visitors just to the Third Avenue business district, which is the Bronx’s oldest shopping district and busiest outside of Times Square.

If we let these giant retailers push their policies onto our credit market too, banks will charge the full interchange fee cap on all our credit transactions and make the small purchases that businesses rely on an expensive cost. It’ll be even worse this time, since our country’s credit market is so much bigger than our debit market. We need to protect the small business owners in our city who rely on credit and debit cards as a crucial part of their business.

During a pandemic that wreaked havoc on New York’s Black and Latino small businesses, we absolutely cannot afford to increase our business costs just so big

corporations can have another payday. Sens. Schumer and Gillibrand should say no to these changes.