Small Business and Durbin-Marshall: Myth vs. Fact

Lawmakers returning to Washington this month were greeted with previously debunked claims and recycled rhetoric about the benefits of the Durbin-Marshall credit card bill. With all the misinformation floating around, the Small Business Payments Alliance is setting the record straight on the negative impact that new government mandates would have on small businesses.    

The Issue

On June 7, 2023, several U.S. Senators and members of Congress introduced the so-called “Credit Card Competition Act” (CCCA) [S.1838/H.3881], known as the Durbin-Marshall credit card bill. As proposed, the legislation would circumvent the competitive free market with a government “routing mandate” that dictates which processing networks banks can accept, without regard to consumer benefits, security, or quality.

The unintended consequences of this legislation pose a direct threat to the benefits of credit card networks that enable worry-free, hassle-free electronic payments. This would also cost small businesses in rewards, payments security, and access to loans and credit.

MYTH: The Durbin-Marshall bill will lower credit card processing fees for small businesses.

FACT: The corporate mega stores that are behind this bill will benefit because they would be able to leverage their large volumes and market power to directly negotiate with credit card network processors to lower the rate for themselves. This is not the case for small, locally-owned businesses who have much lower volumes and market negotiating power than mega retailers. Durbin-Marshall won’t change that but it will increase the cost advantage corporate mega stores have over small business owners. We should be supporting small businesses rather than passing regulations that will help only the largest corporations.

MYTH: The Durbin-Marshall bill would not impact payment security and fraud protection for small business owners and their customers.

FACT: Forcing consumers’ credit cards on to unproven, alternative payment processing networks puts financial data at risk. Not all payment processing networks invest in the same level of fraud protection and security. In fact, many who would offer lower processing costs may do it by skimping on benefits such as fraud protection and security features to prevent data breaches. Beyond the four global payments networks, there is no alternative network that is similarly established, trusted and has the same security and fraud protection for consumers and businesses.

A 2010 debit bill imposed similar routing mandates on debit cards, which contributed to the fraud rate for debit cards increasing by more than 120% in subsequent years. Additionally, by artificially limiting interchange, Durbin-Marshall would limit the funding that processing networks use to invest in and improve security and innovation.

MYTH: Credit card rewards that small businesses rely on will not be affected.

FACT: This bill would eliminate investments for credit card rewards programs and cash back options that American families and small businesses rely on. In Australia after the Reserve Bank added similar regulations to credit that limited interchange fees, the value of rewards points fell nearly 25%. These rewards programs are valuable to small businesses. In 2022, U.S. card issuers spent roughly $100 billion on rewards programs used by small businesses and consumers of all income levels. Small businesses use points and rewards to cover business travel costs, buy inventory, and support their employees.

MYTH: Credit card processing costs are a large expense for businesses, and they are rising.

FACT: The rate of interchange has actually remained flat for the past 7 years. The only reason a merchant would pay more for interchange is because their sales went up proportionately. Many merchants have seen the frequency of electronic payments increase as e-commerce grows in popularity. Additionally, data shows that credit card interchange is NOT among most small businesses’ top expenses. The average small business also pays for rent, wages and benefits, taxes, advertising, inventory, utilities, insurance and the cost of managing cash.

MYTH: Community banks and credit unions are exempt from the legislation; they won’t be impacted.

FACT: Community banks and credit unions would be hurt by proposed credit routing mandates — just as they were by the 2010 debit routing mandates they were also allegedly “exempted” from. Data from the Federal Reserve shows that community banks and credit unions suffered huge losses in the funds they use to invest in rewards programs and free checking, resulting in cutbacks that made banking less accessible – reducing loans and access to credit and free checking. That is why every single credit union and community bank across the United States strongly opposes the Durbin-Marshall credit card bill.

MYTH: The credit card marketplace is not competitive, and is dominated by companies that arbitrarily raise fees that businesses pay to process credit cards.

FACT: The title of the bill is a misnomer because it would distort what is already a competitive market to divert more profits to large corporate retail businesses. There are four centralized credit card processing networks – Visa, Mastercard, American Express and Discover – that compete today. Although American Express nearly matches Mastercard’s market share, it is curiously exempt from the legislation, as is Discover. Furthermore, interchange rates have remained flat at less than  2% for the last 7 years.


The Small Business Payments Alliance is a partner of the Electronic Payments Coalition.