Jerry King is the president and CEO of DEXSTA Federal Credit Union.
Our lawmakers in Dover deserve recognition for carefully considering and ultimately rejecting House Bill 315 during the last legislative session. The bill would have weakened the card payment system that Delaware workers, small businesses and consumers rely on every day. Delaware was not alone: Similar proposals have been rejected in more than two dozen states and blocked or delayed by federal courts because of the disruption and costs they would create.
Supporters framed HB 315 as a way to help tipped workers and to lower costs for small businesses, particularly restaurants. The bill, as proposed, aimed to stop credit card fees from being taken out of tipped workers’ wages. Delaware law already prohibits businesses from withholding tips to cover card-processing costs, meaning the issue the bill sought to address is already protected.
The bill also did not account for how today’s payment system works. Financial institutions, including Delaware banks and credit unions, have spent decades investing in the technology, security and fraud protections that allow people to pay for just about anything with a quick tap or swipe and know that the transaction will be secure, protected from fraud and processed seamlessly.
The system is funded by interchange, a small fee that businesses pay to receive funds immediately, while helping to cover the services and protections that benefit both businesses and consumers. Those protections are easy to take for granted because they operate behind the scenes. Fraud monitoring, cybersecurity investments, dispute resolution and the technology that allows transactions to be processed securely and efficiently are all part of the modern payments ecosystem. Consumers expect to be able to use a card anywhere in Delaware with confidence that their information is protected, while businesses depend on systems that allow them to receive payments quickly and reliably.
If the bill had passed, the result would not have been a better deal for workers or small businesses. It would have weakened the payment system they both depend on, would have shifted costs onto the local banks and credit unions that keep Delaware commerce moving and would have likely forced businesses to only accept cash tips. That matters because the way people pay for goods and services has changed dramatically over the last generation. Consumers increasingly rely on cards and digital payment options for everyday purchases, and many no longer carry cash regularly. Any proposal that changes how tips are processed should be examined carefully to ensure that it does not create new challenges for workers, businesses or customers who have come to rely on modern payment options.
Separating tips from card transactions would have been complicated, expensive and disruptive, with point-of-sale systems across Delaware needing to be reprogrammed and recertified at significant expense to small businesses already dealing with higher costs, inflation and more. While the proposal may have sounded straightforward, lawmakers were right to ask practical questions about how it would actually work in the real world. Similar proposals in other states have triggered litigation, regulatory challenges and implementation delays. Before fundamentally changing how tips and card payments are processed, policymakers have a responsibility to understand the costs, consequences and unintended effects such changes could have on workers, businesses and consumers.
Here in Delaware, lawmakers made a thoughtful decision. By rejecting HB 315, they preserved a system that works for workers, small businesses and consumers.
The bill was part of a broader national effort by some large retailers and chain restaurants to shift costs onto the payment system, without fully considering the consequences for workers, small businesses, consumers and local financial institutions. This issue was not unique to Delaware; similar proposals in states across the country have raised concerns about cost, feasibility and potential disruption.
As community-based financial institutions, credit unions remain committed to working collaboratively with policymakers to find practical, balanced solutions that support workers, strengthen small businesses and serve all Delawareans. We share the goal of helping local businesses succeed and ensuring that workers have opportunities to thrive, while preserving the secure and reliable payment systems that communities across Delaware depend on every day.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
