What They Are Saying: Experts, Texans Warn Interchange Proposals Will Overregulate Small Businesses

Texas is considering two sets of bills that could harm credit card processing in the Lone Star State, making it more difficult and costly for consumers, businesses, and financial institutions, while also impacting Texans’ credit card rewards.

The preliminary set of bills, SB 2026 and HB 4124, obscure both sales tax and tips from credit and debit card transactions, adversely affecting reliability and operational consistency for businesses. The next set of bills, SB 2056 and HB 4061, impose sweeping regulations to the card payment system that massively increase government overreach and erode the free market principles that make the Lone Star State great for business, while disrupting the seamlessness of everyday transactions at a cost to taxpayers.

In the face of significant disruption, Texas small business leaders and national experts are speaking out in opposition.

Ron Hutchison, chairman of the board of the Network Family of Companies in Longview, warned in the Longview News-Journal that these bills pave a dangerous path for Texas:

“If Texas is not careful, it could likely become embroiled in litigation like we’ve seen in Democrat-run Illinois that has upended consistency for businesses trying to comply with conflicting sets of state and federal laws…Any legislation that makes it more complicated for me to process a single transaction is not going to help me grow my business, save money or offer more competitive prices to my customers. Why would Texas, where more than 99% of businesses are considered small businesses, want to implement something like this?”

Rex Solomon, President of Houston Jewelry, echoed similar sentiments towards Texas’ proposed interchange legislation in the Lone Star Standard, stating:

“As the president of Houston Jewelry, a fifth-generation family business that has served Texans since the 1850s, I’ve seen plenty of proposals that were ill-fated from the start. If Texas legislators follow Illinois’ lead by saying ‘I do’ to a proposal to radically change the way credit cards are processed in Texas, our economy could be in for a real wedding disaster, where big retailers walk away with the gifts and small businesses are left paying the bills.”

Additionally, Donna Finley, a local business and restaurant owner in Nacogdoches, Texas, reaffirmed the concerns of small businesses, warning of the legislation’s potentially disastrous consequences in the Lone Star Standard:

“It would create chaos for small businesses like mine and cost me money. My entire ordering and payment system would have to be reconfigured — an expensive and time-consuming burden for any small business… bad policies like this proposal, which would change the way every Texan uses their credit or debit card, fail to consider the realities of running a small business and could harm hundreds of local restaurants, shops and service providers across Texas, including my own.”

During a hearing on the legislation, Brian Yates, Senior Director of Government Affairs for the Electronic Transaction Association, pointed at the backwards nature of the bills and negative impacts that could ensure:

“So we’re asking Texas to basically withdraw from the global payment system and create a new network, which will be expensive and time-consuming for all involved. This bill would also add new compliance and operational burdens on small businesses, especially our smallest restaurants and smallest retailers…This bill (SB 2056) proposes sweeping new regulations on credit card issuers and payment networks, regulations that would disrupt the backbone of how Texans pay for goods and services because of significant government overreach. It creates a burdensome new framework…  its real impact would be confusion and government overreach.”

In the same hearing, Chris Furlow, President and CEO of the Texas Bankers Association, underscored the significant cost and impact to the financial services industry and consumers:

“We all simply want to help small business. But this bill is not simple. A legal observer wrote that the Illinois law caused a backlash. The tech, as we’ve heard, exists in theory. This will be hugely expensive to build, and the same will be true for Texas… Price fixing is an intervention in the markets. Where does it end?… It’s government picking winners and losers. It’s not free market. It’s not Texas.”

As these business leaders and experts argue, the Texas Legislature can and should reconsider these proposals and instead champion the Lone Star State’s robust small business community, protect local entrepreneurs and safeguard its free market principles.