The Hill Blog | July 1, 2008

The bipartisan housing bill currently being debated in the Senate contains an unrelated amendment that will burden innovative Internet companies and threaten the civil liberties of every American.  Without any discussion, Senators added a provision to H.R. 3221 (The American Housing Rescue and Foreclosure Prevention Act of 2008) requiring electronic payment services to collect, aggregate, and transmit details of every sale to the federal government.

This includes not only major credit card providers such as Visa, MasterCard, and American Express, but also pioneers in online commerce such as Amazon, Google Checkout, and eBay’s PayPal.  These companies would be required to construct vast databases of personal information from merchants, including names, addresses, social security numbers, and detailed information about every electronic transaction.  Not only would these requirements trigger higher fees for merchants and higher prices for consumers, but they will also needlessly subject millions of small businesses to the risk of identity theft.

Over the next four years, alternative payment services are projected to serve 30 percent of a $355 billion e-commerce industry.  Unlike large corporations, startups developing creative new tools and services cannot absorb the burdens imposed by H.R. 3221.  Therefore, expensive new reporting requirements could deter entrepreneurs and stunt future growth of the Internet economy.  In addition, these rules could hamstring the advertising platforms that enable companies such as Google to offer free and unfettered access to the Internet.

By forcing companies such as PayPal to keep sensitive information, this provision could also endanger the civil liberties of every Internet user.  Private companies will be compelled to retain detailed personal records that the government can tap at any time.  While the current proposal covers only aggregate income data, nothing prevents a future administration from demanding information about any customer’s online purchases.

Though designed to enhance the ability of the IRS to audit small businesses, this amendment threatens to subject all Internet commerce to dangerous and unnecessary government interference.  The consequences of these regulations should be debated openly rather than swept under the rug through underhanded political maneuvering.