It is no understatement that working class Americans suffered disproportionate damage from the COVID-19 pandemic. Millions of union workers performed essential functions, while most of the country was locked down, ensuring that our grocery shelves remained stocked, construction projects continued safely, and domestic workers kept our families healthy and happy. These workers were responsible for keeping our society afloat. While the fight against this pandemic is not over yet, it is essential that workers be front and center as Congress debates policy decisions that will impact our economy for decades.
For over 60 years, the A. Philip Randolph Institute (APRI) has led the fight for racial equity and labor rights on behalf of minority families across this nation. The labor movement has faced setbacks from the pandemic, and now more than ever, communities need the financial resources and protections to restart their lives and their businesses. As our nation begins the difficult process of rebuilding, it is essential that it is done in a way to promote equity and fairness for the individuals who have sacrificed the most.
For decades, the working class has suffered from high account minimums, monthly maintenance fees, and high interest payday loans. The Federal Reserve reports there are almost 11 million “underbanked” African Americans and roughly 10.3 million underbanked Hispanic Americans. This mean that over 20 million hard working individuals need to access alternative financial services, outside of the traditional banking system.
Alarmingly, some current proposals in Congress might make it more difficult for these deserving individuals to access either traditional or alternative financial systems. Under pressure from big businesses, “routing mandate” legislation is circulating once again. This legislation would require credit cards to use certain networks for processing, removing the choice from the consumers. These card routing mandates will create a huge payout for big corporations, while harming consumers and the small banks and small retailers that often serve minority communities.
These proposed “open routing” mandates are anything but open. They’ll only open the door for offshore networks to leverage their minimal security standards to push out existing, domestically regulated networks. And for families living paycheck to paycheck, they simply can’t afford to deal with the increased fraud and decreased financial access that will likely follow.
For instance, after similar limits were applied on the debit card market in 2010, banks and credit unions lost more than $90 billion—and that lost revenue added monthly account maintenance charges, insufficient-funds fees, inactivity fees, and the virtual elimination of debit card rewards programs. To make matters worse, a 2014 study from George Mason University reported that debit card fee regulations led to an increase in the unbanked population by one million. A University of Pennsylvania study found that, together, consumers lost about $3 billion annually due to mandates on debit cards. The existing debit fee regulation did not benefit consumers and any forthcoming credit card fee regulation won’t either.
For example, for more than 1.5 million union members banking at credit unions across the country, this proposal will ultimately harm the blue-collar Americans who rely on these financial institutions for capital. Research shows that there are about 41 financial institutions for every 100,000 people in predominantly white areas, but only 27 in non-white majority communities. Low-income families can’t afford to lose access to affordable financial services. With the pandemic nearly doubling online commerce, access to credit cards and basic financial services is crucial for everyone. If Congress or regulators were to extend routing mandates to credit cards, communities that need them the most will lose out on accessible credit, cutting them off from modern commerce.
The pandemic showed the need for electronic payments when businesses and consumers, including APRI members, were forced to find fast, contactless ways to conduct everyday transactions. Congress cannot now hurt those members and consumers with harmful credit card legislation that would endanger their financial access.
Congress should be focusing on bigger issues, such as racial equity and the staggering income inequality that plagues our nation. We have an obligation to discuss paid sick leave, maternity/paternity benefits, and a living wage—not another corporate handout that will benefit big corporations while leaving small community banks to suffer.