OPINION:
Walmart may not have become the nation’s largest retailer by playing fair. Some say the company has a long history of strong-arming suppliers and crushing mom-and-pop shops. Now Walmart is not just trying to control where you shop and what you buy, but how you buy it — and its allies in Congress are helping the company do it.
A fintech company majority-owned by Walmart recently announced that it is now offering about 12 times the national average interest rate on savings accounts up to $100,000. While it may sound like a great deal, it is really part of a much bigger plan to lay waste to local banks and credit unions, just like Walmart has done to Main Street businesses.
By offering astronomical interest rates, the Walmart-backed platform can muscle other financial institutions out of the way and choke off the competition. When the sugar high wears off and the benefits disappear for new customers, consumers will have fewer choices.
It’s the Walmart way, and every lawmaker on the Small Business Committee (on which I served while in Congress) knows it.
Even more alarming is how the company has enlisted the help of Sens. Richard Durbin, Illinois Democrat; Roger Marshall, Kansas Republican; Peter Welch, Vermont Democrat and J.D. Vance, Ohio Republican, to push its attack on financial freedom.
These unlikely legislative bedfellows recently introduced the Credit Card Competition Act. Much like the dubiously named Inflation Reduction Act that passed last year, what the bill does and what its title suggests are worlds apart.
The legislation, which would be more aptly named the Big-Box Bill, is nothing more than a windfall for the nation’s largest and most “woke” retailers, including Walmart, Target and Amazon.
When consumers make a purchase, there is a nominal fee, called an interchange fee, added to the transaction to help cover the benefits that come with using credit cards. That includes things like data security, fraud protection, and rewards programs that people rely on to help defray the inflated costs they are seeing on everything from gas to groceries.
If big-box stores get their way with the Big-Box Bill, they’ll get a fee break, but consumers won’t see any savings. What they will see are fewer rewards and less access to credit as financial institutions — left with less revenue — will no longer be able to offer the variety of credit cards Americans have today.
This big-box swipe fee effort is nothing new. More than a decade ago, these stores ran the same playbook on debit card transactions.
They claimed that imposing similar mandates would translate to lower costs for consumers. Not only did that promise fail to hold up, but studies also found that the availability of free checking accounts at banks that fell under the new rules pushed by the big-box stores declined by 35%, while the average minimum balances needed for consumers to avoid paying monthly fees for checking accounts increased by half.
At the same time, nearly all retailers either raised prices or kept them the same. If Congress passes the Big-Box Bill to expand this failed policy effort to our credit cards, Americans can expect more of the same: giving up more benefits so the large, richest corporations can get even richer.
Security is another major benefit put at risk by this ill-advised legislation. By forcing transactions to be routed to the lowest-cost processors, sensitive financial information will be put in the hands of companies that do not necessarily have robust security infrastructure and fraud protections.
Congress should be focused on defending our security and addressing the economic challenges facing families. Seeing them more concerned with helping mega-retailers line their pockets is disappointing.
Any member who is considering supporting the legislation should look at the consequences consumers have already suffered because of the misguided debit card bill.
Demonstrably terrible policy does not deserve an encore. The Big-Box Bill should be dead on arrival.
• Michael J. Pappas is a former member of Congress from New Jersey who served on the Small Business Committee.
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