Repealing Durbin Amendment Would Help SC

By Cathy Novinger

Small businesses are the backbone of economic growth and many need support from financial institutions to help start and expand their operations. Without our small businesses or the community banks and credit unions that are critical to helping small businesses grow, our economy and our communities cannot thrive.

For the past five years, South Carolina businesses and financial institutions have been negatively impacted by the Durbin Amendment. The legislation placed price controls on debit card interchange fees, which are necessary fees to maintain the system of paying with a credit or debit card. Unfortunately, the price controls have put small businesses at the losing end of this deal.

Big-box retail stores have seen savings — estimated at six to eight billion dollars each year — all at the expense of our Main Street merchants. Since the amendment went into effect almost six years ago, 31 percent of merchants actually saw their interchange fees rise. Interchange fees used to be based on a percentage of the total sale, but now are a flat fee. This means businesses selling low-cost items, like the neighborhood deli or ice cream shop, are no longer paying a fee in line with the majority of the products they are selling; instead the fee could now make the sale unprofitable because of the new rigid one-size-fits-all system. For merchants whose profit margins are much smaller than the large retailers, this decline in profit obviously impacts their entire business.

Adding to the pain, community banks and credit unions are feeling the negative impacts of this legislation and are unable to best serve their customers, many of whom are small business owners. The price controls have reduced their revenue, meaning it’s harder for them to invest in services, innovation, and products for their customers. Even though banks have been forced to increase fees and decrease the number of free checking accounts, it still hasn’t been enough to close the gap from Washington’s mandated price controls. Financial institutions have only recouped about 30 percent of lost interchange revenue, impacting the services they are able to offer customers.

Until recently, there was no clear-cut plan in place to end this failed policy. But thanks to efforts by Chairman Jeb Hensarling of the House Financial Services Committee and Representative Randy Neugebauer, there are two solutions and both involve repealing the amendment. Ending this failed policy would have a positive ripple effect on the economy. Community banks and credit unions would be able to better serve their small business customers. Not only would these small businesses have the tools to grow, but they would be freed from the restrictive interchange price controls.

Removing the barriers for South Carolina’s small businesses, which make up 96 percent of the businesses in the state, would strengthen our economy. A solid economy is good for our communities, benefiting you and the nearly five million other South Carolinians in this great state.

Cathy Novinger is CEO of Novinger QTR, Inc.