Solomon: Texas Should Say “I Don’t” to Flawed Proposal to End Guaranteed Acceptance of Credit Cards in Texas

As the president of Houston Jewelry, a fifth-generation family business that has served Texans since 1866, I’ve seen plenty of proposals that were ill-fated from the start. The Texas Legislature is considering a set of disastrous proposals that would make it impossible for consumers and businesses to continue using credit cards with the ease and convenience they have today.

Under the guise of helping small businesses, proponents of so-called swipe fee legislation are pushing for changes that could devastate my business and cause serious heartache for my customers.  The issue involves what merchants pay for service called interchange, which enables businesses to process credit cards instantly and securely for their customers.

Today, merchants have one service agreement in place that covers the interchange service charge for all credit cards. Whether a customer has a card from a national bank, their local bank, or an overseas bank, they can be assured their card will work in my store. This universal access to credit cards is good for customers and good for my business.

But Senate Bill 2056 by Sen. Kelly Hancock and House Bill 4061 by Rep. Jared Patterson would force me to negotiate credit card processing agreements with more than 200 banks, one by one. I would only be able to accept credit cards from banks with whom I’ve struck a deal. My customers will not know if their cards will work at my store until their card is declined at check out.

This plan may benefit large retailers who have teams of lawyers to negotiate hundreds of fee schedules for them; not so for small businesses like mine.

The second proposal to invite chaos into my store is Senate Bill 2026 by Sen. Donna Campbell and House Bill 4124 Rep. Drew Darby would carve out sales tax and tips from overall card processing costs on every transaction – meaning my credit card-paying customers may have to pay sales taxes in cash.

This plan will save big retail stores tens of millions of dollars, according to research from the Electronic Payments Association.  Small businesses would save about $11 per month – “savings” that comes at the cost of implementing an entirely new payment processing system. I would have to pay my bookkeeper far more every month to manage this headache than I would “save” in this scheme.

The federal courts recently blocked a similar law in Illinois. The Office of the Comptroller of the Currency called their law “ill-conceived,” “largely unworkable,” and “bad policy” that would create a “fractured payment system” and lead to “higher fees, reduced services, and weakened fraud protection.”

Policies that break successful economic systems are a bad idea.  The current electronic payment system works efficiently because it’s standardized and secure. As a small business owner operating on thin margins, I’m especially grateful for instant fraud protection that flags suspicious charges without my employees getting involved. I also appreciate how much credit card chips and debit card pins are helping to deter fraud in my store. This security allows us to focus on serving customers and maintaining trust built over generations.

Claims about “sneaky swipe fees” don’t hold up – there’s nothing hidden about card processing costs. They’re a transparent cost of doing business that funds the system that makes secure electronic payments possible. My business couldn’t absorb the cost of fraud alone that these systems prevent.

More than three million small businesses like mine, our employees and our customers power the Texas economy. No less than 5 million Texans – about 45% of the workforce – are employed by small businesses.  At a time when many small business employers are struggling to stay afloat, lawmakers must consider the consequences of policies designed to enrich large corporations at small business’ expense.

Proposals to bring credit card chaos to Texas threaten the convenience and security of our business processes and raise costs for local establishments at a time when we can least afford it.

In 175 years in the jewelry business, Senate Bill 2056/HB 4061 and Senate Bill 2026/House Bill 4124 may be some of the worst proposals we’ve seen yet. Lawmakers should say “I don’t.”

Editor’s Note: The above guest column was penned by Rex Solomon, president of Houston Jewelry, a fifth-generation family business that has served Texans since the 1866. The column appears in the Rio Grande Guardian with the permission of the author. Solomon can be reached by email via: Luke@gfoxconsulting.com.

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