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As an active member of the Arizona Hispanic Tax Professionals Association, a nonprofit committed to supporting the Latino small business community, and a accountant, I understand how hard it can be for Hispanic-owned businesses to succeed. They often struggle to access essential financial services, yet these businesses are vital to our communities, creating jobs and spurring economic growth. We must do all that we can to help them flourish.
Unfortunately, the U.S. Senate is considering legislation that threatens to undermine Arizona’s Hispanic community and Hispanic-owned small businesses. The Credit Card Competition Act (CCCA) proposes changes to credit card processing that its supporters claim will benefit retailers and have some trickle-down benefits for consumers. However, the likely consequences of this bill are far more alarming than its purported benefits.
In 2010, Congress made a similar error with the Durbin Amendment, which capped interchange fees for debit transactions. The result? The five largest multi-billion-dollar retailers including Costco, Walmart, Amazon, Kroger, and Home Depot raked in over $100 billion in savings, yet consumer prices didn’t drop. Meanwhile, as small businesses didn’t have the same leverage as big businesses to take advantage of the routing mandates in the law, they often ended up paying more in interchange fees and found more barriers to affordable banking services.
If Congress doubles down on this failed policy with the CCCA, we can expect similar results. A University of Miami study predicts that those same five retailers will pocket at least an additional $1 billion as a result of this bill. Small businesses and consumers, once again, are unlikely to see any benefit. Many of my clients are already hurting because of the inaccessibility of capital for small business owners.
The CCCA also poses a threat to the small local financial institutions our communities rely on for business loans and credit cards. Economists estimate the bill could cost small banks and credit unions $5 to $10 billion, forcing them to reduce the services they provide to aspiring business owners from lower-income and underserved communities. This could be a catastrophe for people who rely on credit cards to cover emergency expenses.
Despite claims from supporters that small banks will be exempt from the regulation, a 2017 Federal Reserve study revealed that these banks were still adversely affected by the 2010 regulations These changes will ultimately impact all financial institutions, and already underserved communities will be the first to lose access to the credit they need.
The reality is that these changes will reverberate throughout the entire financial ecosystem, potentially forcing community banks and credit unions–the very institutions that often serve as economic lifelines in underserved areas–to scale back services, increase fees, or even shut their doors, further widening the financial gap in already struggling communities.
I urge Arizona’s Congressional delegation to learn from past mistakes and stand up for Hispanic communities by opposing the CCCA.
Marco Martinez is a tax professional and active member of numerous chambers of commerce.
