By Tim Carpenter, Kansas Reflector
TOPEKA — National Federation of Independent Business lobbyist Dan Murray welcomed the opportunity to urge Kansas legislators to forbid credit or debit card companies from collecting swipe fees on tip and tax portions of electronic transactions.
Murray works in the Capitol on behalf of 4,000 NFIB members who operate businesses in Kansas and have endured consequences of inflation and thinning margins. He said one piece of the economic puzzle was the slice taken by card companies in processing fees applicable to the cost of a good or service as well as sales tax paid and workers’ hard-earned tips. Swipe fees have doubled since 2012, he said.
“Unfortunately, credit card processing fees, which can range from 1.5% to 3.5% on each transaction, exacerbate the financial strain of Main Street, making it harder for employers to expand their operations, raise wages and keep their costs competitive,” Murray said.
Under the proposed Consumer Inflation Reduction and Tax Fairness Act contained in House Bill 2089, issuers of debit or credit cards wouldn’t be able to charge a Kansas merchant an interchange fee on the tax or gratuity amounts of an electronic transaction. The bill would give merchants 180 days after the date of a payment transaction to report to card companies the amount of gratuity and tax.
The bill would enable merchants, a county or district attorney and the state attorney general to seek a restraining order against violators of the law.
The House Financial Institutions and Pensions Committee conducted an “informational” hearing Monday on the bill, suggesting the Legislature may be reluctant to move ahead with the measure in 2025.
The bill attracted opposition from Alex Orel of the Kansas Bankers Association, which includes 98% of headquartered banks in Kansas, and Cale Beam of the Kansas Credit Union Association.
Orel said the concept featured in the Kansas House bill was comparable to an Illinois statute being challenged in federal court. A judge issued an injunction to block enforcement of the Illinois law on collection of credit and debit card fees in terms of tips and taxes as it related to out-of-state banks. The U.S. District Court allowed Illinois to ban collection of credit and debit card fees for tips and taxes involving in-state banks.
“With litigation ongoing, why would Kansas adopt policy courts are dismantling?” Orel said. “Adopting HB 2089 would invite lawsuits from banks, credit unions and federal regulators.”
He said interchange fees averaged 1.8%, and for a $100 transaction associated with 6.5% sales tax the fee was 12 cents.
Meanwhile, Beam said the House legislation would “threaten credit unions and the members they serve” and “represent unnecessary government intervention in the operations of private businesses.”
Beam said electronic payment options benefitted businesses that choose to accept debit or credit cards with a guaranteed payment. Retailers don’t have to track down bounced checks or carry large amounts of cash vulnerable to theft, Beam said.
Beam said credit unions and other financial institutions relied on interchange revenue to fund operations. Loss of this revenue could influence cash flow to borrowers by introducing higher loan interest rates, lower interest rate savings, reduced member dividends and fewer services to customers, Beam said.
Brian Posler, who lobbies for a statewide trade association of independent Kansas energy distribution companies, said the legislation would end the practice of charging retailers a special tax or fee to collect sales tax for the government.
“The swipe fees currently levied on sales taxes are state-sponsored, guaranteed profits for Visa and Mastercard,” Posler said. “Why is the state creating massive profits for the big national banks based in Delaware at the expense of Kansas merchants and consumers?”
