- The Washington Times - Thursday, July 17, 2008



A Trojan priest once uttered, “Trust not their presents, nor admit the horse” - words of admonition voiced in a vain attempt to warn his people of the Greeks’ impending ruse. The debate over credit card interchange fees has taken the form of a modern Trojan horse, and threatens a key component of our nation’s economy.

The merchants’ lobby, bankrolled by the nation’s biggest retailers who stand to gain the most, is trying to sell legislators on an anti-marketplace, government price-control scheme. They would have Congress upend the very payment system that supports consumers’ ability to use a credit card in a convenient and secure way - and that merchants have come to depend on for much of their business. Community bankers know this spells trouble. We have lots of experience with big retailers trying to limit competition.

The Independent Community Bankers of America’s message to members of Congress is simple: Don’t be fooled into letting election-year politics dissolve long-held, free-market principles.

The myth exposed in the Trojan horse known as the Credit Card Fair Fee Act is that price controls - a concept mentioned at least a dozen times in this legislation - will somehow improve the economic landscape for consumers and merchants. It should come as no surprise, then, that scores of retailers have been canvassing Capitol Hill. Merchants - particularly the big ones - will pocket more profit by artificially keeping their costs lower and paying less to run their businesses, if they convince Congress to create a new federal bureaucracy with the sole purpose of manipulating the functions of the marketplace for the merchants’ benefit.

This issue hits at the core of our local economies.

There is no free lunch here, and small community banks and individual consumers will feel the pinch from the merchants’ windfall. For consumers, the resulting reinstatement of annual fees, reduction of rewards programs, and loss of choice for Americans who have come to appreciate the convenience of their credit cards, is going to beg some serious questions of those who push for what amounts to a government-mandated subsidy of the nation’s big retailers come November.

Proponents of the so-called Credit Card Fair Fee Act are telling legislators, price controls are warranted because of a failure of the marketplace.

Where is the “failure” when the market in question empowers thousands of small community banks to offer card products to consumers and small businesses, gives those consumers the ability to shop at more than 24 million card-accepting locations worldwide, and has been empirically shown to boost sales volume and revenue for retailers of all sizes who choose to accept plastic?

For community banks, the current interchange system allows us to aggressively compete and offer card products and services, bundled with the type of long-term relationship-building services unique to our business model. Should the government start depressing interchange rates, many community bankers will be forced to stop issuing cards to consumer and small business customers.

To put this in perspective: What leverage would a $100 million community bank offering small business card products have in a competition against Bank of America - that has nearly $1.7 trillion in assets?

Our interchange system addresses this disparity and allows community bankers to compete with the big issuers, giving consumers and entrepreneurs more choice and better rates and fees. No one wins when there are fewer choices and less competition, including small businesses that can often find a better deal with their local community banker.

The failure to realize the true intention of the Trojan horse led to the sacking of Troy. Overlooking the consequences of such a one-sided bill would directly harm millions of Americans who benefit from credit cards, small businesses that want to shop around for the best terms and conditions, and the thousands of community banks who want to compete for their business. Members of Congress should not abandon principles that support competition and choice for American consumers, for the fallacy of price controls.

Camden R. Fine is president and CEO of the Independent Community Bankers of America.



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