Comment: State push to limit ‘swipe’ fee could hit card use

By Russ Rosendal / For The Herald

The motto “move fast and break things” might work for a fast-growing startup, but when it comes to finances, “if it’s not broke, don’t fix it” might be the wiser approach.

Unfortunately, some state legislators in Washington and in many other states throughout the country risk breaking a system that works remarkably well for both households and small businesses.

I have worked for Salal Credit Union for 15 years and I know firsthand the essential role local financial institutions play in meeting the needs of our members and communities. Whether it’s a first home, a college education or new car, local financial institutions are there for these big events. We are also there for the small ones; like the cup of coffee you bought on the way to work or your family’s groceries. These ongoing, daily purchases are often made using your credit or debit card.

For consumers, card transactions are fast, convenient and secure. For small businesses, they are essential to commerce, increase purchase volumes and are more efficient — and safer — than processing large amounts of cash every day. We are reminded of this daily as Salal Credit Union serves the state’s legal cannabis businesses, which can only accept cash at the point of sale, leading to significant safety and efficiency challenges.

Credit and debit cards offer valuable services and the card networks, banks and credit unions invest heavily in the technology to make it all happen seamlessly and securely. “Those investments are somewhat offset by processing costs, which average about 2 percent and are known as interchange.

This rate has remained essentially unchanged for a decade. This basic service directly supports robust and ever-evolving benefits for consumers in our complex world. Those benefits include investing in anti-fraud and cybersecurity systems so that if your personal information is stolen online, your savings are protected.

Interchange also directly benefits more than 672,000 small businesses across our state. In exchange for this fee for service, a business can accept a credit or debit card from their customers no matter what part of the state, country or world they are coming from. It also means that consumers can be held harmless if a payment was made fraudulently.

That’s why I’m concerned whenever I see proposals that would undermine the reliability of this system when it is already subject to federal regulation.

Illinois recently adopted a law that tells payment card issuers they cannot be compensated for some of their direct costs. Unsurprisingly it immediately ended up in court, where a judge stopped the law from going into effect.

Of concern to local state-chartered credit unions and banks is large national and out-of-state banks would be exempt, while local credit unions in Illinois and their members could see payment processors decline to accept their payment cards rather than re-designing the entire system for a portion of a transaction for a small share of payments in a single state.

I can’t speak for Illinois, but given our state’s budget situation I question why we would knowingly sign up to spend millions of taxpayer dollars in litigation costs defending a lawsuit from large banks and payments companies on a policy that is clearly out of compliance with federal regulations and fails to benefit the local economy. The Washington Legislature is considering such a bill, House Bill 1623.

Think about what is at risk next time you swipe your card: The peace of mind knowing your purchase and data is protected and the convenience small business owners receive knowing they don’t have to deal with the security hassles of cash or the threat of a bounced check. The current system works; and it works well.

Some states might want to move fast and break things, but having lived and worked in our community for over 40 years, I know when it comes to the safety, reliability and security of my financial transactions, I don’t think the state Legislature should create a problem that doesn’t exist.

Russ Rosendal serves as the president and chief executive of Salal Credit Union.