Angela Conti

The near-daily array of monumental local, national and international news understandably occupies a lot of our time and energy, leaving less attention to focus on other matters. Perhaps, treat reading this as a break to consider a topic that you may not think about every day, but that could have a significant negative impact on consumers and small businesses in Massachusetts if three bills before the Legislature are allowed to move ahead.

Lobbying efforts from large national retailers and industry groups have resulted in proposed legislation introduced in nearly two dozen states, including Massachusetts, to fundamentally alter card payments. Although it may not be as sensational as many other recent headlines, the potential impact is quite consequential.

The proposed credit card legislation may be well-intentioned, but it’s important to understand the full implications, including significant negative impacts on both consumers and small businesses, if H.1259, S.205 and S.688 were to pass.

Who Bears the Burden?

These proposals would bring significant changes for both consumers and small businesses – creating consumer uncertainty at the register and operational complexity for small businesses, likely requiring additional paperwork, software and hardware upgrades. Although proponents argue these changes would benefit consumers or small businesses, it is important to carefully evaluate who would ultimately bear the costs and complexity of implementation.

Any policy change of this magnitude warrants cautious consideration of its real-world impact. The convenience and reliability of universal card acceptance is core to our payments system. Consumers and small businesses rely on this fast, secure and consistent payment acceptance every day. Often taken for granted, today’s payments system ensures customers don’t have to carry cash while still benefiting from the convenience, protections and rewards that credit and debit cards offer.

If enacted, the proposed legislation would upend a foundational guarantee of our payments system. Today, merchants can accept payments and customers can use their preferred card at virtually any store, without worrying about whether a particular bank or network has a special deal with that specific business.

H.1259 and S.205 would require merchants to execute individual agreements with banks over $85 billion in assets – that’s more than 280 institutions worldwide. This would be an extraordinarily complex task for local small businesses that already operate with finite resources, often on thin margins.

Asking a neighborhood cafe, small retailer or local family-run business to negotiate agreements with hundreds of global banks is unfair and unrealistic. Without these agreements in place, customers may discover their card is no longer accepted only once they reach the checkout counter, creating frustration, confusion and delay at the point of sale. In some cases, transactions could be abandoned altogether.

Bill Would Force Costly Investments

Along with H.1259 and S.205, S.688 calls for the elimination of interchange fees on the tax and tip portion of transactions. This proposal would create operational complexity by requiring two separate transactions, one for the base payment and another for taxes and tips.

Small businesses would again shoulder the burden, as they would need to upgrade or replace their point-of-sale technology to handle this new, specialized transaction process. In the face of that complexity, some merchants might instead require customers to pay the tax and tip portions in cash, creating inconvenience if customers do not have enough cash on hand.

Given the challenges that small businesses already face, introducing these policy changes would complicate their ability to run a profitable operation. Policymakers should strongly consider the probable burden and negative impact of these proposals on consumers and locally owned small businesses.

All of this is happening against the backdrop of a recent and significant court settlement between Visa, Mastercard and a class of U.S. merchants to lower credit card processing rates. The settlement represents a good-faith effort by both sides to resolve a long-standing dispute. The court settlement is yet another reason to pause and carefully assess additional structural changes.

Fortunately, a special commission made up of political appointees and representatives from industry is conducting an analysis of the proposed legislation and its impact. While it is likely that this thorough examination will conclude the policies are harmful to Massachusetts, the process will leave no stone unturned. Once that work is complete, we hope Massachusetts will join virtually every other state that has considered such changes in recognizing that our current card payment system should be upheld, so it can remain fast, secure, reliable and accessible for consumers and small businesses across the commonwealth of Massachusetts.

Angela Conti is an executive vice president and head of consumer and small business banking at Cambridge Savings Bank.