Credit Cards by Sean MacEntee is licensed under CC BY 2.0
  • House Bill (HB) 677 (its companion bill is Senate Bill (SB) 564) mandates the state government to intervene in contracts between private parties (e.g., retailers and financial institutions).
  • The bill cuts interchange fee revenue, which are service fees paid to fund the allocation of credit and disburse rewards through credit cards, by prohibiting the fees from being applied to the full amount of a point-of-sale transaction. This prohibition applies to debit, credit, and prepaid card transactions.
  • Assume a large Florida retailer remitted $1 billion in sales tax last year. If this bill had been in effect last year, payment card networks would have been required by the government to rebate tens of millions of dollars back to the retailer to cover the sales tax and tips for the transactions. The bill effectively applies a redistribution of wealth from financial institutions and consumers to large retailers. 
  • This bill distorts the entire credit market and is the antithesis of free market policy.
  • 83% of Americans own at least one credit card.
  • According to data cited by the International Center for Law and Economics (ICLE), “86% of credit cardholders have active rewards cards, including 77% of cardholders with a household income of less than $50,000.” 
  • The subsequent reduction in interchange fee revenue will raise the cost of credit, increase account fees, and limit the availability of rewards that banks can offer its customers. 
  • To comply with the bill, financial institutions would need to modify payment settlements to deduct or rebate the amount of the sales tax and tips from interchange fees. The government-mandated compliance costs would easily exceed $1 billion. This could slow down the payment authorization, clearing, and settlement process in the U.S.
  • These issues are why many conservative, free market organizations warned Florida legislators against HB 677/SB 564.
  • Instead of this giveaway to large retailers, legislators could increase the collection allowance deduction as Gov. Ron DeSantis proposed in his budget. This would give businesses breathing room on their sales tax burden. 
  • When a similar proposal to split the sales tax portion of the receipt was proposed in Arizona and Massachusetts, retail groups opposed the regulation as a massive burden on small businesses.
  • Lawmakers should oppose and vote against these bills.

If enacted the bill will likely:

  1. Drastically cut credit card rewards programs 
  2. Reduce the availability of credit for consumers and small businesses
  3. Enable massive woke retailers to pad their pockets while consumers and small businesses will see little to no savings at all