AIF urges Florida’s congressional delegation to oppose new credit card regulations

Businesses scramble to keep up with consumer shifts.

The head of an influential business group sent a letter to Florida’s congressional delegation this week urging them to oppose new regulations on credit card processing fees.

Processing fees, known in the financial industry as “interchange fees,” are levied by credit card issuers against vendors to cover the costs of a transaction. They typically range in size between 1% and 3% of the transaction total.

Two major credit card networks, Visa and Mastercard, recently proposed changes to their interchange fee schedules, raising rates for some purchase categories and lowering them for others. The companies acknowledge the changes will result in an increase overall, though some businesses, such as restaurants and hotels, will pay lower rates than they do currently.

U.S. Sen. Dick Durbin, an Illinois Democrat, pushed back after the announcement, saying Visa’s and Mastercard’s “profits are already high enough and any further fee increase is simply taking advantage of vulnerable Americans.”

He has since floated imposing new regulations on the industry that would limit card issuers’ ability to raise fees, casting it as a pro-consumer and pro-small business policy.

The Associated Industries of Florida, which represents a consortium of major Florida businesses, says that the proposed regulations would have the opposite effect.

In an April 27 letter to the Florida delegation, AIF President Brewster Bevis wrote that if Durbin gets his way, “the security on electronic payments will be jeopardized and credit card point systems for consumers will be lost.”

Bevis cited a study produced by Florida TaxWatch that examined past regulations pushed by Durbin that harmed low-income Americans, namely his amendment to the 2010 Dodd-Frank Act, which imposed regulations on U.S. banks amid the Great Recession.

“The 2010 Durbin Amendment had unintended consequences, disproportionately burdening the lower-income populations least able to handle the fees and higher minimums. The impact was immediate and profound,” the cited FTW report says.

“The Federal Deposit Insurance Corporation (FDIC) estimated that the number of unbanked households increased by a million from 2009 to 2011, and by moving low-income consumers out of the mainstream banking system, the Durbin Amendment forced vulnerable consumers to make greater use of alternative financial services providers, such as check cashers, pawnshops, payday lenders, and other high-cost financial services that cater to the unbanked.”

Bevis said the new proposal would allow credit card transactions to be routed through foreign networks, increasing the likelihood that consumer information could be hacked by foreign countries such as China or Russia. The higher risk would likely counteract credit cards’ consumer protections, which are funded via interchange fees.

“At this time of conflict abroad, it would be especially disadvantageous to consumers to force a new regulation on their credit cards that could open up all of their financial information to foreign governments,” Bevis wrote. “We are urging your close monitoring of this proposed legislation from Sen. Durbin and requesting that the security of consumer’s financial data be the highest priority in your offices’ analysis.”

Moreover, Bevis said Durbin’s proposal could lead to changes in the credit card rewards programs — such as cash back or airline miles awarded for purchases — which consumers have made more use of amid rising inflation.