Senator Jenny Oropeza’s commentary last week (June 17th) called for fairness to consumers over “check-out fees”. However, predictably the Senator’s piece mentions nothing of the financial burden imposed by the electronic payment networks, such as MasterCard and VISA, or the anti-small business and anti-transparency nature of Senate Bill 933.
First, SB 933 reduces transparency and shifts costs. Proponents of SB 933 apparently believe that costs associated with debit cards simply go away if prohibited by law. The truth is that this bill eliminates the transparency that currently exists through point-of-sale disclosure, shifts the costs onto the backs of small businesses, and puts the big payment networks in a position to raise rates at will (30% increase in April 2010). Small businesses will suffer the brunt of increasing interchange fees and consumers will pay more for all goods and services in order to subsidize those who use debit cards.
SB 933 also limits consumer choice of payment options. As was the case with the ban on surcharges for credit card interchange fees, SB 933 will force some retailers to refuse acceptance of debit cards or establish minimum purchase prices (commonly $10.00) for acceptance. How are consumers best served by fewer options to make basic purchases?
State and local government will continue to be allowed to impose a surcharge that in some cases is $25 or more for paying debts like parking tickets. The big utility companies are also exempt, so your electricity bill may come at a higher cost. If the utilities and state and local government cannot afford this bill, why do legislators expect that small businesses will not be hurt by SB 933?
SB 933 ignores the true costs of debit card fees. After wages and facility operation costs, the “interchange fee” represents one of the largest business costs for a small retailer. This bill does nothing to address the burden of this payment network-imposed fee on California businesses.
And if that was not enough, SB 933 creates a new private right of action against businesses and shortcuts pending litigation. By including three-times damages plus attorney’s fees, this bill establishes a new niche market for lawsuits against California’s job creators. In the past year, the electronic payment networks have either sponsored or supported bills similar to SB 933 in several states that are designed to eliminate their exposure in a federal lawsuit, beginning in New York. They are reasonably concerned that the court will rule against the industry practice of mandating contracts that allow them to hide the costs of interchange fees, so some of these networks are pushing state legislation as a failsafe.
If only Senator Oropeza’s passion for “fairness” extended to the hundreds of thousands of small business owners who open their doors every day with the hope that when they close them at the end of the day, it will not be the last time. Perhaps then California small businesses would have the confidence and certainty necessary to create jobs and restore California’s golden reputation. Nickel-and-diming small businesses with bills like SB 933 just grinds them into the ground and makes a horrible small business climate tragically worse for the business and customer alike. It’s time for the legislature to stop adding burdens to California’s job creators and start making it easier to grow and expand their businesses and get Main Street and our economy moving again.