The Tipping Point: HB315

By Evan R. Park

As Delaware policymakers consider House Bill 315, introduced by Rep. Kim Williams, banks and payment networks are raising concerns about unintended consequences. While the bill aims to reduce costs for some businesses, the industry warns it could create broader challenges across the payments system that ultimately impact merchants and consumers.

What the Bill Would Do
House Bill 315 would prohibit the collection of interchange fees on the gratuity portion of credit and debit card transactions. Banks and card networks emphasize that interchange fees are a foundational component of the electronic payments system, supporting fraud prevention, cybersecurity, transaction processing, and consumer protections.

Full-service restaurant wait staff often earn a base wage of just $2.23 per hour, with most of their income coming from tips. Currently, when customers pay with credit cards, servers receive their full tip, while restaurants pay roughly 2% in processing fees on the total transaction. This bill would eliminate that fee on the gratuity portion, amounting to a few cents of savings per transaction. 

It’s also worth noting that many restaurants already account for payment processing fees when they price their menus. The cost of a meal reflects everything it takes to run the business — not just the ingredients, but wages, rent, utilities, and credit card fees. Those expenses are already built in.
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Key Concerns with the Legislation
From the banking industry’s perspective, carving out a specific portion of a transaction (such as tips) introduces operational and structural challenges:

• System Limitations: Today’s payment systems process transactions as a single total, not itemized components. Separating out tips for fee purposes would require system upgrades, adding cost and complexity.
• Compliance Burden: The bill allows for retroactive reporting (up to 180 days) and refunds, which could create additional compliance and operational challenges for financial institutions and processors.
• Pricing Shifts: Limiting interchange fees on one portion of a transaction could lead to adjustments elsewhere in the system, potentially increasing costs in less visible ways.

Broader Economic Implications
Banks also note that interchange fees help fund benefits that consumers and businesses rely on, including fraud protection, rewards programs, and secure transaction infrastructure. Limiting these fees could have ripple effects, including: 

• Reduced incentives for card issuers to offer rewards or low-cost banking services.
• Potential tightening of credit availability, particularly for small businesses and consumers with limited credit histories.
• Increased costs in other areas of payment processing that could offset any anticipated savings.

While some merchants, particularly in the restaurant and hospitality sectors, may see modest savings, banks argue those benefits may be uneven and offset by new costs, including potential point-of-sale system updates. 

Current Status
House Bill 315 was released from the House Economic Development, Banking, Insurance and Commerce committee

The Ongoing Conversation
The Delaware State Chamber continues to monitor the bill and gather input from stakeholders and our members. The banking sector is encouraging a collaborative approach to ensure any policy changes are thoughtful and balanced.

As the conversation continues, input from Delaware’s business community will be key to shaping outcomes that support both economic growth and financial stability. Reach out to me at [email protected] if you have any feedback. 

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