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Skala: Repeal Durbin amendment on debit fees

Illinois holds a special place in my heart. Many of my biggest milestones occurred within our pocket of the state: not only have I been a lifelong resident of McHenry County, but I earned my bachelor’s degree from Northern Illinois University and have chosen to raise my family here. Because of that, it remains of the utmost importance to me that McHenry County – and the rest of the state – can grow and continue to be a great place to call home.

Through my work as a County Board member for McHenry County, I work hard to ensure our citizens enjoy a good quality of life and can stay and grow here as I’ve done. However, as a small business owner – I own manufacturing companies Innovative Component Sales Inc. and ICS Flange – and as a community bank customer and stockholder, I’m especially in tune with the problems affecting other entrepreneurs and those who help our community grow.

For example, the Durbin Amendment, which Congress passed in 2010, has had harmful consequences for communities like ours, as it has affected consumers, small businesses and community financial institutions.

The law allowed the federal government to intervene in the functioning, competitive free market by setting price controls on debit interchange fees, which merchants pay to accept and authorize debit card transactions. Before this, interchange fees were based on competitive market forces and allowed for discounts to those businesses selling small-ticket items (such as a cup of coffee or a candy bar), but under the new system, card networks were forced to eliminate those concessions.

This is bad news for many small businesses – such as the small restaurant I own, which typically processes card transactions for $10 to $15 – which line our downtown streets and contribute to our local economies.

With flat fees in place, smaller merchants may face fees that are disproportionate to the cost of the good. In fact, one study found that among merchants who saw a fee change, nearly one in four faced a price hike – 11 times as many as those who saw a decrease. Many of those affected by higher fees are responsible for small-ticket items, which can threaten the profitability of the sale.

Unfortunately, the effect on mom-and-pop shops doesn’t end there.

Our local community banks and credit unions are feeling the effects of this failed policy, which then affects their customers, ranging from an entrepreneur looking for a business loan to an established business owner opening a checking account to a family trying to secure a mortgage. In total, financial institutions have seen a decrease of billions of dollars in their interchange revenue each year because of the price controls and the recurring administrative costs that come from the amendment’s routing provision. This loss has forced many institutions to reduce free checking and debit card rewards for customers. Even still, by raising checking fees, banks only offset one-third of their losses.

We cannot afford policies that ultimately hurt our small businesses, yet that is exactly what has happened with the failed Durbin amendment. Price controls rarely work as intended, and the past five years have been a harsh reminder of just that.

Congress must work together to do away with this policy in 2017. I encourage Rep. Randy Hultgren to support repealing the Durbin amendment, as it would help all of us here in McHenry County and beyond.

• Mike Skala is a local business owner and a McHenry County Board member.

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