April 29, 2023
Sal Nuzzo and Grover Norquist
As the state legislative session comes to a close, there are several important changes in law that will matter to Florida citizens. One bill would cost Floridians a great deal of time and money. It should be stopped as soon as possible.
This bill will limit the benefits and data security that Floridians currently have with their credit and debit cards.
Florida Senate Bill 564 and House Bill 677 prohibit an interchange fee, or a service fee for using credit cards and debit cards, from being applied to the full amount of a transaction. This is a government-mandated price control. Financial institutions, such as small community banks and credit unions, would be required to rebate merchants the amount of an interchange fee charged on the tax amount of a transaction. The bill gives merchants leeway by allowing them to bill banks or credit unions up to six months after the electronic transaction occurred. This clearly is the government siding with one industry over another.
This is pure rent-seeking policy that empowers the state government to dictate service fees negotiated between private parties. There is no current market failure this is solving.
An interchange fee is not for public or governmental use. It is a fee negotiated between private parties. The fee is used to allocate revolving lines of credit, improve privacy and fraud protection, and pay for rewards programs. Removing sales tax from the calculation of the interchange fee is not a tax cut, it is a way for special interest groups to pad their pockets.
Government intervention like this is anathema to the foundational principles of free market enterprise in the United States.
Amid all this fighting, consumers are forgotten, the ones that stand to lose the most. Consumers will not receive savings if these bills are enacted.
This legislation parallels the big government provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that Democrats praised in 2010. After Dodd-Frank, more than 20 percent of merchants raised prices, and only 1 percent lowered them. According to a study conducted by the University of Chicago, after Dodd-Frank, consumers lost between $22 and $25 billion.
The Florida bill also makes it harder for financial institutions to implement improved cybersecurity protections for consumer data, because the bill will reduce interchange fee revenue that is used for fraud protection technology, such as tokenization.
Additionally, the bill makes it more expensive to fund rewards programs and co-branded cards that offer airline points or sky miles to consumers. These extra costs will undoubtedly result in higher costs for consumer services, or an elimination of services altogether.
This bill will result in more compliance costs and harm consumers, small businesses, small community banks, and credit unions.
Instead of enacting legislation that takes choice away from consumers, the House and Senate should focus on passing bills that will benefit consumers. That is why Florida lawmakers can and should support Senate Bill 214, which would reaffirm Floridians’ right to bear arms. It would also prohibit the state government and financial institutions from tracking consumers’ purchases of firearms. This is a commonsense bill that is pro-consumer.
Lawmakers could also increase the collection allowance deduction as Gov. Ron DeSantis proposed in his budget. This would give small businesses breathing room on their sales tax burden.
Lawmakers have a choice. They can defend consumers’ right to bear arms and reduce the tax burden on small businesses, or support legislation that will limit options for consumers. In the name of free market enterprise lawmakers should choose the former and reject legislation that is no more than a rent-seeking exercise by special interest groups.
This is part 1 of 2.