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updated: 3/19/2017 3:18 PM

How Wall Street reform has also hurt local business

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  • Scott Gryder is Kendall County Board Chairman and an Oswego professional who says federal regulations are hindering Main Street businesses.

    Scott Gryder is Kendall County Board Chairman and an Oswego professional who says federal regulations are hindering Main Street businesses.
    Courtesy of Scott Gryder

By Scott Gryder
Kendall County Board Chairman

As any Illinoisan will tell you, there is much we can be proud of in the Land of Lincoln. For example, as the official state slogan attests, President Lincoln, as well as Presidents Grant and Obama, all lived in Illinois; President Ronald Reagan was born and raised here.

However, Illinois is more than just the home state of presidents -- Route 66, the original Ferris wheel, the mechanical dishwasher, the moving walkway, Shredded Wheat, the first sustained nuclear chained reaction, and the first zipper all started in Illinois.

We can be proud of such achievements stemming from our great state but there's one idea that, however well-intentioned, has been a major disappointment -- for Illinois and the rest of the country.

While the Dodd-Frank Wall Street Reform and Consumer Protection Act was intended to do just that -- reform Wall Street and protect consumers -- not all parts of the bill have lived up to that objective. Take, for example, the Durbin amendment, named after Senator Dick Durbin, who helped insert it into the larger financial bill, which passed without any debate or study on its potential impact.

While sold as a regulation that would help, this legislation has done just the opposite, hurting Main Street community banks, credit unions and small businesses -- and taking services away from consumers.

As county chairman, my job is to do my best, to do what is right for our residents and businesses, which means sorting through special interest desires, looking at the data, and making decisions that will improve our communities.

Here is the reality: the Durbin amendment created a regulation that capped interchange fees -- what retailers pay in order to accept debit card payments from customers. Now, price controls are bad in general, but when the government forces them onto a working and transparent market like the electronic payments system where, previously, merchants and banks and the other players openly negotiated, something has to give. What happened in this case is that, overnight, financial institutions lost a major source of revenue and merchants started pocketing the extra $6 billion to $8 billion in savings instead of lowering the price of goods like they promised.

Interchange goes to everything from supporting the electronic payments system's rails so both consumers and merchants can get the benefits of electronic payments to the latest in technology and innovation. If you ask me, that sounds like a good way to spend the money.

While the law recognized smaller institutions like community banks and credit unions and "exempt" them from the Durbin amendment's price control provision, the amendment imposed millions and millions of dollars of costs for these smaller community financial institutions in the form of compliance requirements, sourcing revenue away from actually serving customers and toward paperwork. This is especially burdensome for credit unions, whose members are part owners. How does this help Main Street and protect consumers, you may ask?

If stifling price controls and stacks of paper weren't enough, talk to our local mom and pop shops: they lost out big when legislation passed. Before, small ticket small businesses would receive discounts that would put the interchange fee in line with what was purchased, like a cup of coffee for example. This benefit went away after the Durbin amendment's price control went into effect, making it much more expensive to accept a debit card payment for small purchases like your morning cup of coffee. Ever see those handwritten signs at the register? Please Pay In Cash: We Are A Small Business. Now, while large retailers reap the benefits of extra revenue, customers lose out on the convenience of paying how they want, while our small businesses are just trying to stay afloat.

I have seen firsthand the effect that onerous and burdensome legislation has on local small business. I try to stay in touch regularly with local chambers of commerce or local business and always ask what we can do to assist small business. It usually comes back to how the state or federal government makes it so difficult for them. Rolling back this amendment is one solution.

As consumers, we can write to our local and national representatives and ask them to repeal the Durbin amendment. Let's stand up, together as Illinoisans, to protect Main Street from the influence and grip of Washington special interests.

Scott Gryder also serves on the Kendall County Economic Development Committee. He is general counsel for Near North Title Group in Oswego.

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