Credit card reform not all it’s cracked up to be

Dear Editor:

We all sympathize with mom-and-pop store owners struggling to make ends meet (“Credit card interchange fees effect small business owners in big ways,” 4/20). But who would really benefit from the retail industry’s efforts to hijack credit-card reform for their own purposes? Wal-Mart, not mom and pop.

Who would lose? Working families.

Wal-Mart, McDonald’s, Circle-K and the other national chains are asking Congress to let them band together to force down the agreed-upon rate they pay banks and credit unions whenever a customer uses a credit card in a store or restaurant. The so-called interchange rate of 1.5% to 2% pays for the benefits retailers receive from accepting cards: instant payment, higher sales and freedom from the expenses of running their own credit-card programs – including marketing, collections and default risk (if the customer never pays, it’s the local bank, not the retailer, that eats the cost).

Experts say the Big Retail scheme could cost ordinary folks more than $400 a year. Congress’ own independent accounting agency – the Government Accountability Office – agrees: in November, the GAO reported that consumers could be harmed by the retailers’ scheme. And small banks and credit unions could be forced out of business, depriving local economies of much-needed credit.

If Congress reforms the financial system to protect consumers, that’s great. But Louisianans should not support “credit card reform” that lets Big Retail rip off the rest of us.

Rafael (Ray) Valdes,

President, UH Services Group, New Orleans