1 week Ago
As a former professor of economics in the commonwealth of Virginia, I am an unabashed supporter of free markets and limited government regulation. Therefore, I could not be more concerned about how aggressively the federal government is attempting to regulate the payment methods that the residents of this commonwealth most frequently use. Their regulatory approach, both overreaching and inconsistent, will inconvenience millions and lead to increased unemployment and income inequality in the Old Dominion.
Let me be clear — if any firm breaks the law or even violates the spirit of the law, then our legal system should get things right. But that’s not what is at issue here. At issue is federal government overreach into private business actions that seem politically motivated.
During the Biden administration, an agency known as the Consumer Financial Protection Bureau fought to stop Americans from using digital payment services such as PayPal, Venmo and Zelle as “substitutes for a traditional bank or credit union account.” It even sued Zelle shortly before leaving office, stating that it did not keep its users secure.This was a politically biased contention, as scams don’t even compose 1% of these platforms’ transactions.
Occasionally, fraud does occur, just as it does at banks in the form of check or bank wire fraud, but these occurrences are often due to user, not platform, misjudgments — hardly a reason for a regulatory crackdown.Peer-to-peer (P2P) payment services such as Zelle are enormously popular. In the first half of 2024, small businesses and consumers sent nearly half a trillion dollars via Zelle alone — and Americans are voting with their feet away from the costly traditional services offered by some of the big banks.
It’s not an overstatement to say that Zelle and other P2P services are a form of “financial democracy.”While it was busy suing Zelle, the Biden administration was also suing Visa’s debit card business over monopolization concerns. This logic makes little sense because, when going after Zelle, the government said it feared Americans were using these new payment services too frequently — sometimes even instead of the traditional bank accounts (which Zelle hooks up to).
So, on the one hand, the government is suing companies such as Zelle over concerns about there being too much competition, but on the other hand, it is suing Visa, stating there is not enough competition in the payment industry. Suing both Zelle and Visa at the same time poses an inherent contradiction.Why does this war on payment choice matter to Virginia in particular? Simple: Small businesses in the Old Dominion are navigating a complex landscape of challenges that threaten their growth and sustainability.
Rising operational costs, shifting consumer behaviors, and economic disruptions have already strained these enterprises. The last thing they need is for the government to be going after their preferred payment methods.Sign up for Viewpoints, an opinion newsletterVirginia’s financial services industry supports thousands of jobs, and this regulatory overreach could stifle investment in fintech innovation.
Small banks and credit unions in Virginia could also face uncertainty, ultimately hurting consumers. With an unemployment rate at a low 3%, policymakers should be wary of actions that could disrupt a key economic driver for the commonwealth.Virginians already suffer tremendously from the federal regulatory state.
According to the Mercatus Center at Virginia’s George Mason University, 101,063 more Virginians lived in poverty from 1997 to 2017 thanks to an influx of new federal dictates, with income inequality in the commonwealth rising by nearly 3% during that period for the same reason.Fortunately, the Trump administration has already taken steps in the right direction, starting with scraping the Zelle suit. We need less regulation, not more, and I think this new pro-business administration will get this right.
Dave Brat, Ph.D., of Lynchburg represented Virginia’s 7th Congressional District from 2015-2019.
He is the senior vice president of business relations at Liberty University. This column reflects his views, not those of the university..
