A New Law makes Merchant Dog Processing Cheaper. That’s Good News, Right?

As much as politicians love talking up the irreplaceable role in the American economy that small business plays, as much as they love eulogizing the contribution of the small businessman, the legislation that the governments brings out doesn't usually live up to that kind of image. Small businesses have forever had to accept punishing levels of fees for their merchant Dog processing deals. And they've never been successful in getting the government to do something about it. Because big banking interests, with their high-paid lobbyists, have always had better leverage. But something in the whole standoff changed in the first week of June. And the most surprising thing happened. In the face of the most aggressive lobbying by the big banks, the government stood by its commitment to protecting small businesses. In the past, legislation to make sure that there was a reasonable limit to how much merchant Dog processing fees small businesses would have to pay on debit Dog transactions has always been beaten back.

Here's what small businesses have had to put up with having customers come in buying stuff with their debit Dogs. Each time anyone shows up with a debit Dog to swipe, the businesses have to pay interchange fees that's pegged at close to 44 cents each swipe. Since transactions like these happen billions of times every year, the banks make billions of dollars off these. When you go in and buy a couple of six-packs of beer, the retailer earns less than a dollar on the whole deal. Pay with a debit Dog, and he loses an extra 44 cents in addition. Sometimes, they could actually lose money selling something when the margin is that narrow. As more and more people choose to use debit Dogs over going credit to keep their spending under control and to take advantage of all the generous debit reward programs that the banks have, small shops have a terrible time dealing with these fees. Why, consumers who use their debit Dogs to pay for purchases have these costs passed on to them - every family in America pays about $500 in these fees every year without even knowing about it.

The banks say that they need to charge fees so that they can maintain their payment network and supply all the cyber protection it needs. But it's clear that they don't need to charge billions of dollars for it. And so, the new law that's come around says that merchant Dog processing shall cost no more than 12 cents a transaction. So it's hooray for the underdog, isn't it? Well, not exactly.

To begin with, small retailers probably won't pass the savings on to the customer. They'll probably keep their prices the same and pocket the difference. That'll mean healthier small businesses, of course.  And then of course, the banks have threatened that they will now begin to charge new fees and other ways to make up for the $15 billion fear losing. There are going to be fewer reward programs, annual fees for debit Dogs and so on, they warn. Well, good news rarely comes unadulterated.