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Credit Card Competition Act will hurt us and our companies

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As a proud Arizonan and Latina small business owner, I advocate against any policies that threaten economic empowerment for our communities. I can say wholeheartedly that the Credit Card Competition Act will hurt us more than it will help us.

Recently, there was an op-ed authored by a DC-based group trying to tell us that the Credit card Competition Act will help Arizonans. But what makes this bill unique is that we do not have to sit and wonder how it will impact our communities. We have seen it before, and we already know. Senator Durbin passed a similar amendment for debit cards in 2010 called the “Durbin Amendment”, which imposed a routing mandate to help big box stores save money on the interchange fees they pay to process debit cards. Banks lost billions and stuck consumers with higher fees, higher minimum balances, and far fewer free checking accounts. One million Americans, primarily people of color and other underserved folks, got kicked out of the banking system when it became unaffordable for them.

Meanwhile, big box stores like Target and Walmart have secured over $100 billion in extra revenue from that amendment, and the number just keeps growing while small businesses see no benefit. Yet to no one’s surprise, these retail giants did not share that wealth with their customers by lowering prices, according to a Richmond Federal reserve study. Any policy passed on the assumption that big box stores will be generous with their revenue is destined to disappoint.

Just like the it’s predecessor, the Credit Card Competition Act will give retail giants a boost at our expense. The bill will put a routing mandate on credit cards and let retailers save money on the small interchange fees they pay. But this money has to come from somewhere, and when banks see their interchange revenue dropping, it will again come from our pockets. They will limit their lending and become more restrictive on who gets a credit card, they will raise fees, and they will raise interest rates. Up to seven million Latinos will lose credit access.

Proponents of the bill are claiming that it will benefit small businesses, but it will actually make it more difficult for them to access loans and credit services while big box stores save billions. In Illinois, their Hispanic Chamber of Commerce wrote to the Credit Card Competition Act sponsors in July, stating that these additional mandates on the credit market, “could restrict critical lending on which these businesses rely”. The United States Hispanic Chamber of Commerce voiced similar concerns for small businesses in a letter last year. With 44% of Hispanic business owners seeing their loans denied, we certainly don’t need policies making them even less accessible.

This bill is also going to hurt the small banks and credit unions we rely on in our communities. These are places where big banks are reluctant to invest and folks are already left with too few banking options. The bill sponsors say that the Credit Card Competition Act exempts small banks, but research from the Federal Reserve shows that a routing mandate creates industrywide changes that impact all banks, just like what happened after the original Durbin Amendment.

It is painfully obvious why big box stores like Walmart, Home Depot, and Amazon are pushing for the Credit Card Competition Act. They are going to get yet another huge windfall, between $40 and $50 billion extra per year, that we will pay for. We would be naïve to think that this time around, they’ll share the wealth.

Congress should implement policies that will make credit more accessible, not less. Access to credit means access to education, small businesses funds, and everyday essentials for our families. Arizona’s Latino communities only stand to lose if the Credit Card Competition Act passes.

Irayda Flores is the owner of Puerto de Guaymas, a seafood wholesaler that imports her product from Mexico.

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