Saturday, December 15, 2007
Wednesday, November 14, 2007
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Mitch Goldstone & Carl Berman [lead plaintiffs]
co-editors - WayTooHigh.com - The Credit Card Interchange Report
Sunday, November 11, 2007
- "Under the planned IPO, which could happen as soon as 120 days after the global reorganization Visa completed Oct. 3, Visa would sell an approximately 51% interest in the company to the public through so-called Class A shares. The rest of the shares—Class B held by Visa USA members and Class C held by other financial-institution members internationally—have no voting rights.
- The filing says Visa will use the IPO’s net proceeds for ..., and for a deposit into an escrow fund to cover settlements or judgments from litigation.
- ... Visa still faces a host of suits and regulatory challenges involving everything from interchange to antitrust to currency- conversion fees.
- Despite MasterCard’s encouraging experience, Visa’s success on Wall Street is by no means guaranteed. Shares of Discover Financial Services LLC have fallen 37% since Morgan Stanley spun off its card subsidiary in late June.
However, the news of what could be the second largest IPO in U.S. history is garnering little attention. Other than a few wire service updates, so far the news has been deafeningly silent. The big news is that with the American Express® settlement solved, according to the news stories, it's clear sailing for Visa's IPO.
We think, just like with MasterCard, the thousands of banks which own Visa will try to cash out as fast as possible. So fast, that it might even topple and overturn the offering.
Last time, the member banks were not in the fiscal calamity that they face today. When MasterCard went public, the member banks were not realizing billions in mismanaged losses. Today, they are in much greater need of enhancing their capitalization; what better way than to pass off their ownership in Visa? Their earlier rush to sell off part of their MasterCard investment , and its overshadowing price-fixing litigation, turned into one more multi billion dollar fiasco - the price they set was $39.00 a share. Oops - with MasterCard nearing $200.00, it seems that nothing they do is right. Are they so distracted by our lawsuit that they have lost their focus and spirit?
Whether it was buying up the subprime housing mortgages and loosing billions, to their other poor decisions that even forced CEOs to flee, they just cannot get it right. This time, they might get extra greedy at the exit and seek an offering price that will melt even the appetites of the most drunk-on-risk thrill-seeking investors'.
Reporters are not writing about the warnings of insolvency, nor are they explaining that our litigation is a much larger threat than even their pay off to AmEx.
Saturday, November 10, 2007
The credit card network in its filing said that from the proceeds they hope to raise, they plan to deposit a portion of it into an escrow account to pay settlements or judgments related to litigation.
Visa Hopes to Raise $10B in IPO
[Source: via AP, Commentary: WayTooHigh.com]
Friday, November 09, 2007
Thursday, November 08, 2007
"$5.00 Gas Now In California - Think of the Windfall Profiteering From Credit Card Interchange Fees at the Pumps (via KSBW-TV)
This news is most significant, as the AmEx® suit is tiny in relation to the much larger and more widespread merchant antitrust litigation, which has the potential not just to distract from the VISA IPO, but cause the company to face insolvency.
[Commentary, WayTooHigh.com, via AP news story]
Wednesday, November 07, 2007
According to AP, "The truce announced Wednesday rids Visa of a potential albatross before the San Francisco-based company's initial public offering of stock." The reality is the AmEx® settlement is puny when compared to the more than $100,000,000,000 mega-billion dollar violations that Visa, MasterCard® and their member banks could owe in our class-action merchant interchange litigation. With more than eight-hundred WayTooHigh.com news and commentary postings - spanning more than 2 1/2 years - and with a great deal of attention drawn towards our litigation, Visa and its sister payment network, MasterCard, are not in the clear, by any means.
Extracted from the preceding SEC IPO filing, in MasterCard Inc's own words:
1) "... We have not established reserves for any of the significant legal proceedings in which we are currently involved."
2) "If we are found liable in any of these lawsuits, we may, among other things, be forced to pay damages and/or change our business practices and pricing structure, which could have a material adverse effect on our revenue and profitability, or, in certain circumstances, even cause us to become insolvent, and result in a significant reduction in the value, or the complete loss, of your investment ..."
3) "If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa."
4) "If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business."
Largest Planned IPO Since Google has No Safety Net (WayTooHigh.com)
If you read into the AP story, it appears that Visa's IPO will now face calm waters. Hardly. Just look at their SEC filing and very clear risk factors that if [when] we are successful and prove our case that they illegally used their market power to conspire to fix prices, along with the triple damages, they could face "insolvency." The same is true for MasterCard as well. Can't get any clearer than that!
"Besides raising financial uncertainties, the case threatened to raise embarrassing questions about Visa's past business practices with a September trial date looming," said AP. Embarrassing?, just read the prior eight-hundred and one WayTooHigh.com postings! Overlooking our weak grasp of English and liberal rules of grammar, and you see something much more ominous.
Although Visa today did not acknowledge any wrongdoing, a first-grader would know that something must have happened as they prepare to hand out $2,250,000,000. Could you imagine if they DID do something wrong?!
According to the AP story, "American Express' three-year-old lawsuit painted an unflattering portrait of Visa, alleging the network operator conspired with some of its largest card issuers to thwart American Express' growth." So far, MasterCard's head remains in the sand. Everyone at the card association seems blind to the reality of our case, especially Sharon Gamsin, their PR and communications hack, who according to the same wire story said "MasterCard remains confident about its defense against the allegations." Sure. Since the same financial institutions which own and control Visa and gave the green light to settle, were also on the MasterCard and Visa boards for many years, what's the difference?
Getting back to that first-grader, even they would have to conclusively understand that MasterCard is next to recognize that the game is up.
"Before IPO, Visa Reaches a $2.25 Billion AmEx Antitrust Settlement" (Digital Transactions)
[commentary: WayTooHigh.com, via AP news story]
"AMERICAN EXPRESS REACHES $2.25 BILLION SETTLEMENT AGREEMENT WITH VISA" (via, company press release)
Reprinted AmEx Release in it's entirety.
AMERICAN EXPRESS REACHES $2.25 BILLION SETTLEMENT AGREEMENT WITH VISA
NEW YORK, November 7, 2007 --
American Express said today that it has reached an agreement to drop Visa as a defendant in a lawsuit alleging that MasterCard, Visa and their member banks had illegally blocked American Express from the bank-issued card business in the United States.
Under terms of the settlement agreement, Visa will pay a maximum amount of $2.25 billion to American Express. Individual banks named in the lawsuit will also be dropped as defendants. These include: J.P. Morgan Chase, Capital One, U.S. Bancorp, Wells Fargo and Providian. The agreement is subject to the approval of Visa’s member banks.
MasterCard remains the sole defendant in the American Express case. The lawsuit, which was filed in Federal court (November 2004) by American Express, seeks monetary damages for the lost business opportunity that resulted from the illegal conspiracy to boycott American Express. American Express is expected to seek damages in the billions of dollars. As the sole remaining defendant, MasterCard would be liable for the full amount.
“The size of this settlement, along with earlier court rulings, underscores the seriousness of the damage done by the illegal boycott,” said Kenneth I. Chenault, chairman and chief executive. “We plan to move forward with the litigation to hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years and to seek full compensation for the value that would have been generated for our shareholders.”
Under terms of the agreement reached with Visa, Inc., Visa USA, and Visa International, American Express will receive an aggregate maximum payment of $2.25 billion. An initial
payment of $1.13 billion will likely be recognized by American Express in income during the fourth quarter 2007. The remainder, payable in installments of up to $70 million per quarter over the next four years, is subject to achieving certain quarterly performance criteria within the U.S. network services business of American Express.
“Given the strong growth momentum we have built within that business, we are highly optimistic in our ability to meet those performance requirements,” said Mr. Chenault.
In light of the settlement, American Express said that it is likely to incur a number of significant additional fourth quarter expenses, including:
Incremental investments in marketing, promotion, rewards, cardmember services and other business building initiatives designed to capitalize on competitive opportunities in the payments industry at a time when some competitors are pulling back.
Additional funding for the American Express Foundation, which will support the company’s ongoing philanthropic activities.
Litigation expenses related to the lawsuit against Visa and MasterCard.
Given the continued evolution of its rewards programs, the Company also said that it is currently evaluating enhancements to its method of estimating its liability for Membership Rewards®, including the consideration of an actuarial based approach for estimating the ultimate redemption rate. These enhancements could result in a significant one time addition to reserves upon implementation.
“Rewards and customer loyalty programs have been a key element of our success, and we expect them to continue to be a centerpiece of our strategy going forward,” said Mr. Chenault. “The overall economics of a rewards-based strategy are very favorable: higher spending, stronger loyalty and superior credit metrics. Our expectation is that more Cardmembers will enroll in rewards programs and generate a growing share of their overall spending with American Express. Our higher enrollments and improvements to the program in recent years are causing us to continually evaluate and enhance the method to estimate the ultimate usage of points earned by our Cardmembers.”
The aggregate cost associated with this potential addition to the Company’s Membership Rewards liability and the other items mentioned above could represent a significant portion of the payment expected to be realized this quarter.
The Company said that any decisions about whether to reinvest future payments into business building activities will be made on a quarter by quarter basis over the next four years. “This settlement compensates us in part for past damages in a way that allows us to invest in our future,” said Mr. Chenault. “We intend to be consistent with our approach of the last several years, capitalizing on marketing and promotional opportunities and enhancing our network when we see chance to gain a competitive advantage. We have been generating very attractive returns on our investment spending of the past few years and believe that the pipeline of market opportunities will continue to be strong in the years ahead.
American Express Reaches $2.25 Billion Settlement Agreement With Visa
“At a time when weakness in parts the economy is affecting many financial services companies, the settlement will give us greater flexibility and confidence to meet our financial goals while continuing to fund business building initiatives and support future acquisitions.”
[Click here to view the American Express press release, via American Banker]
From our prospective, this is encouraging for our class-action and important news as the world's largest credit card company prepares for a multi-billion dollar IPO early in 2008. [Then again, pending current stock market conditions, who knows when the right market timing will be?]
The case was initiated a year before our complaint filing, in 2004 by American Express which charged the two leading card associations and some of its member banks of preventing thousands of banks from using the American Express cards through anti-competitive practices. As with our class-action, the two credit card associations were accused of being co-owned by the very same banks. The acquirers and issuers are the same - the leading difference between the giant 80% Visa and MasterCard® market power is the spelling of their names. Yes, the card associations explain they are in head-to-head competition, but what they don't explain is they are on the same team. Think of two pro football players on the same team; yes, they are different, but they have the same ownership, controls and game plan.
American Express claimed that Visa and MasterCard both violated antitrust law by barring banks from issuing credit cards for rival networks. Just as with our litigation, Visa faced triple damages.
We are very encouraged by this news and expect that MasterCard will quickly come to the same conclusion as Visa. As this litigation faces settlement, the associations and banks legal teams will have more time to read WayTooHigh.com and its message that interchange fees are too high, unjustified and in violation of antitrust laws.
[Commentary: WayTooHigh.com , via Reuters]
"Antitrust Claims Against Credit Card Companies and Major U.S Banks" [MSN Groups: USBanks Complaints]
Tuesday, November 06, 2007
More info, click here
"JPMorgan Chase Calls It: 'A Lump of Coal' - We Call It: More Bait &-Switch Banking Gimmicks (WayTooHigh.com)
We received the below letter today. But, first, as a refresher on how these games are played, see the below links to prior WayTooHigh.com postings. Even JPMorgan Chase® has a sense of humor as it sticks its tongue in the face of all its merchant customers. In the bank's own words from their Nov 1st press release: "(For this promotion, PIN purchases qualify only for a lump of coal)."
Look at What Visa® is Up to Now (WayTooHigh.com)
Confusing Debit Cards (WayTooHigh.com)
Who Is The Real Violator? (WayTooHigh.com)
Dear Mitch Goldstone:
JPMorgan Chase (one of the named defendants in your antitrust litigation, and the biggest bank in my area with a 17% market share) has came up with a sneaky new way to switch people over from cheaper PIN debit transactions to more expensive signature transactions this holiday season, forcing merchants to pay higher fees in the process (just when they need it the least).
The promotion, named "Chase Picks Up The Tab" (which runs until December 31) goes like this: Every 500th Chase Visa Check Card purchase from all enrolled Chase checking customers who reside within the promotional area is paid for by Chase (up to $500, and if the purchase is less than $5, the payoff is $5)... Chase will be giving out an estimated 50,000 purchases. But PIN-based purchases are not eligible among the "qualifying purchases".
Way to go, Chase! You just made merchants furious!
And how will this be paid for? Interchange profits, of course... instead of merchants paying 25-50 cents for PIN debit, they'll have to pay that 1.8+% signature debit fee, so this should be called "Merchants Pick Up The Tab (In Higher Interchange Fees)". And customers will want to sign because of this promotion... so what will be the bottom-line hit to merchants in areas with large amounts of Chase checking customers, and what will be the payoff to Chase (and Visa Inc.)? You can bet on one thing: It won't be pocket change for either.
P.S.: Don't forget that JPMorgan Chase also owns over half of one of the three largest Visa/MasterCard processors (Chase Paymentech), so the payoff to JPMorgan Chase could be even bigger at some merchants. Any wonder why JPMorgan Chase is doing better than Citigroup or Wells Fargo?
Monday, November 05, 2007
This Reuter's picture of CitiGroup's leaving Charles Prince is "price-less."
Look back at the bank sponsored bankruptcy reform law of 2005; it made clearing consumer debt much harder. Fewer people were able to file for Chapter 7 protection, which was aimed to add further stability and protections for the financial institutions. Or, was it just a another sweetheart deal from Washington to its hefty campaign contributors and lobbyists? It helped the credit card industry and handed them billions of dollars while debtors had to pay back these "loans." The "Bankruptcy Abuse Prevention and Consumer Protection Act" was little more than a payoff to the banks. Read more.
While the credit card associations and its member banks were cheering, they lost sight of a much bigger storm - sub prime loans that enabled people earning just $40,000 annually to "buy" $800,000 homes and others to with few assets to flip homes. They became little more than renters who were teased with low or no upfront down payments and no income verification requirements.
Reuters is reporting that "Citigroup may write off $11 billion of sub prime mortgage losses, on top of a $6.5 billion write-down last quarter." Even MasterCard, had set aside $650,000,000 to help cover its legal liabilities.
Today, the thousands of banks, which control[ed] MasterCard and own Visa® were thought to have more greed than even the oil companies. The "Bankruptcy Abuse Protection" scheme was wrought with one-sided greed. Now, the mortgage collapse faces similar greed. Both cost billions to address and the newest round, the ongoing misguided fee adventure with anti-competitive merchant interchange rates can become the banks' newest way to squander billions more.
Interchange fees are no longer cost-based - only about 13% of interchange fee costs are used to cover its transaction costs. Along with Visa and MasterCard, the banks too are being accused by us and members of the class action of market power to illegally fix prices. With all their other leaking dikes, a new round of billion-dollar floods is unpreventable and they could again turn to wield their unbridled greed by raiding their interchange cash cow, raising rates and causing more hardship.
The banks rich piggy bank are interchange fees - a $40 billion annual hidden tax on the economy. They schemed in their misadventure to dump their legal liabilities by selling off part of MasterCard on the public. Now a much larger IPO is on the horizon to do the same with Visa. Washington and our economy should take notice. Like with MasterCard, Visa is warning that they too could face insolvency if our litigation is successful.
With the loss of leadership jobs at Merill Lynch and Citigroup and many newly homeless customers in defaults and billions in existing fiscal mismanagement, we urge our readers to prepare for the next economic bail out. This time, it is not about mismanagement, but monumental greed. The new looming concern are those corporate chieftains who are looking more Al Capone-like as a modern day "untouchable" symbol of the collapse of law and order. But, don't look for the banks to be robbing themselves to cover their misadventures; interchange fees are their hedge that we must all be very worried about.
Sunday, November 04, 2007
This site features the most comprehensive international breaking news, daily updates and commentaries on the history of merchant interchange fees. The goal in representing millions of merchants and cardholders is to reform an antiquated, costly and unfair payment system and explain why the nearly $40 billion annual merchant interchange fee is a hidden tax on consumers and retailers.
WayTooHigh.com: The Credit Card Interchange Report, is co-edited by Carl Berman and Mitch Goldstone, founders of California-based 30 Minute Photos Etc., the national online boutique photo service, 30minphotos.com and its newest division, ScanMyPhotos.com. Berman and Goldstone are also the lead plaintiffs and class representatives in the multi-billion dollar antitrust class-action litigation against Visa, MasterCard and member banks. This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked.
Friday, November 02, 2007
Here's another posting on the topic.
Credit Card Fees Force Red Cross to Impose Minimum Donation Amounts
[commentary - WayTooHigh.com]
The WSJ's Robin Sidel is reporting [click here, subscription required] that "Charles Prince, the beleaguered chief executive of Citigroup Inc., is planning to resign at a board meeting on Sunday, according to people familiar with the situation.... Citigroup has lost more than a fifth of its market value since Oct. 12."
In 2006, just under 30% of all holiday shopping was online, this year, according to the PayPal release, it will be 40% which means that the card associations and member banks are poised to take even more money from interchange fees. Nearly all online orders require electronic payments. For our business, 100% of all ecommerce business requires electronic payments.
Why is this so important to our interchange battle?
When you use a credit card, where the acquiring and issuing financial institution are the same, effectively, they mirror gift cards. The gift card is being electronically transacted by the issuing business and ... there are no interchange fees. Just like when you write a paper check, or use a PIN-based debit card in Canada, there are no interchange fees. So, the question is, how can Visa® and MasterCard's® market power still force this $40 billion hidden tax on retailers and consumers?
The banks might counter and explain that gift cards prove there is a choice and that there really is competition. But, not so fast. How are most gift cards paid for? That's right, plastic! And, Visa and MasterCard have nearly an 80% market share of the electronic payment network.
[Commentary, WayTooHigh.com, via survey data from the Oct 31 PayPal BW release]
Thursday, November 01, 2007
Job description [GadBall Jobs]:
- This role on the WDP&R Credit Card Management team will be responsible for planning and forecasting credit card commission expense for the Walt Disney World Resort and the Disney Cruise Line and producing variance analysis for actuals versus plan, prior year and forecast. This role will analyze interchange expense to identify and evaluate the source of transaction downgrades and propose remedial action to mitigate the effects of transaction downgrades. This role will also be responsible for identifying industry trends and developing analyses to evaluate the effects of the trends on Segment operations. Additionally this role will be responsible for project management of planned initiatives and for creating executive presentations related to issues, projects, and opportunities.
[Source, commentary, WayTooHigh.com, via GadBall Jobs posting, see link]
Wednesday, October 31, 2007
"$105 a Barrel" Would Mean More Windfall Profits for Credit Card Companies (WayTooHigh.com) (Originally posted on May 26, 2006)
Seventy-two pages, five-pages or one line? (WayTooHigh.com)
Why not post exact interchange fee on receipts? (WayTooHigh.com)
Every credit and debit card receipt should include interchange charge (WayTooHigh.com)
MasterCard® interchange rate schedules on website (via PRNewswire)
On a Personal Note, Today, ScanMyPhotos.com [30 Minute Photos Etc.] was Profiled in USA Today (Click here to read)
In May, 2006, Forbes' Liz Moyer wrote an article about MasterCard's pending IPO, and questioned, "How priceless is this IPO?" Click here to read. Moyer's was questioning the risk factors to the card association and its investors due to its "considerable litigation risks." As the lead plaintiff in this antitrust case, we haven't seen a significant change of direction and the case continues. So, why exactly is MasterCard a buy at $190.00, when within its SEC offering documents they, like Visa has too, explained that my victory could lead to the company's insolvency. Perhaps, the only thing that has changed are investor's memories of this case. With nearly 800 below WayTooHigh.com news and commentary updates, there is a wealth of reasons to be even more worried than was Forbes' reporter.
Monday, October 29, 2007
Click here for an overview of the spot.
Click here to view other "Life Takes Visa®" spots.
Click here to read how Visa describes it in their online press release.
There are a series of similar Visa USA ads which depict the mental damage inflicted when consumers pay with paper rather than plastic. One spot shows a man buying a donut with cash, while a line of hungry people flash that same stymied look that an overwhelmed mom gives her kids when they start shouting in a supermarket. The message is "Life Takes Visa," but the reality is that if the donut shop is anything like the one next door to our Irvine, CA retail location, the owner is paying a hefty price when people use a credit card - especially a signature affinity card that come with even higher merchant rates. The fact is, with minimum payments, that donut shop owner may have just paid out more in interchange fees than the cost of the donut.
According to Mitch Goldstone, president and CEO of ScanMyPhotos.com and 30 Minute Photos Etc., "the Visa's® gang of advertising handlers presented inflammatory, anti-gay stereotypes in it's new kick-off to the 2007 NFL season with its 'When the Saints Go Marching In' TV commercial." Goldstone, who along with his partner, Carl Berman, are also the lead plaintiff's in the multi-billion dollar merchant interchange antitrust litigation and explained that another worrisome image from the commercial that also impacts all retailers is the new message that cash is bad.
The TV ad, airing during football games depicts how easy and fun it is to use your Visa payment cards to buy products, but when a preppy-looking man, in a pink shirt and sweater delicately wrapped around his neck becomes the standout, lone customer using cash, everything stops. It doesn't show how frustrated clerks get when the electronic payment network is slow or when the magnetic strip on the back of a credit card is worn, and thus requiring manual account number entry, which is one of the nearly one-hundred separate and higher interchange fees imposed on retailers.
In the TV spot, the cash-paying customer became the protagonist and tool for Visa's latest attempt to train consumers to use payment cards, rather than cash. The message is: if you dare to use cash, you will make everyone angry and turn against you. A clearer message to Visa and MasterCard is from us, your customers: Interchange fees are a $40 billion annual hidden tax on retailers, consumers and our economy and those abroad.
We are not the first to note how damaging this ad is.
Here are a few postings on the YouTube site:
" Nothing great, or even good, about this ad"
" [I]sn't it typically the other way around...takes longer waiting for a fool to pay with a credit card than cash.dumb commerical"
[commentary, WayTooHigh.com, via You Tube-linked Visa commercial]
During one U.S House hearing from time ago, the question was asked why the banks [Visa® and MasterCard®] are charging such high fees. That question was raised when oil was a tiny fraction of today's $93.00 a barrel.
We ask the question again.
- Whatever happened to MasterCard's proposal to cap interchange fees at the pumps at $50.00?
- Why, as best we can identify, did Visa remain silent and not join in the cap on interchange fees?
- If they can put a cap on gas station fees, why not all fees, since, it is our contention that the bulk of the actual costs are tiny (only about 13% of interchange fee costs are used to cover its transaction costs).
- If MasterCard could issue a press release that touted a cap on interchange fess at the pumps, why not in everything else too?
Interesting that Visa enable its much smaller card association ally to come up with the cap in interchange fees at service stations without matching the program. If they were truly competing with each other, you would have thought the price elasticity would have snapped in place. By the way, whatever happened to that MasterCard's interchange fee limit, did it ever take effect that was promoted in their press release more than a year ago? [MasterCard was reported to explain that they were establishing this cap, but, was it ever imposed]?
Remember: both Visa and MasterCard are/were owned by thousand of the same member banks, so they were more like a giant Starbucks-type business, then separate, like McDonald's and Burger King. Could you imagine if two independent, competing multi-national business conglomerates had the same board representation and the same group of owners? Think of Richard Branson's Virgin Airlines and its arch rival, British Airlines. I doubt they even talk to each other, other than in biting advertisements taunting each other, and thus much less likely to meet together and use their market power to illegally fix airline prices. Hey, that is our argument for how the electronic payment network regularly operate[s]d.
MasterCard's® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com) Dec 16, 2006
Friday, October 26, 2007
Lots of useful data, but conspicuously void are any links for merchants to help us, and therefore consumers, prevent our $40 billion annual hidden electronic payment fee.
In their words, click here to view.
Fact: Visa®, MasterCard® and Its Member Banks Are Profiteering From Califorina's Wildfires (WayTooHigh.com)
Unless the card associations are planning to rescind the merchant interchange fees for non-profits, they and its thousands of financial institution member banks are poised to reap mega bucks from this unfair and hidden tax. In one hand, some banks are issuing press releases proclaiming their donations to this cause, but in the other, larger hand, are the tainted currency being siphoned back from the interchange fees imposed on well-intended peoples' benevolence.
Way to go, Visa® and MasterCard®
The credit and debit card acquiring industry are now acquiring vital funds that are needed to go to the recovery effort, not into the bank vaults to help remedy their own mismanagement from their exposure to the sub prime housing loan crisis. We wonder if those donating money are aware of these fees?
Excerpt from About.com [Credit Card Processing for Nonprofits]:
- Unfortunately for nonprofits, most of their transactions are not done face-to-face and fall into this category called “card not present” or “mail order telephone order (MOTO)” transactions. MOTO processing rates can also vary substantially based on the type of card and your organization’s processing volume - but it will typically be to 1% higher than a physically swiped transaction. (Personally, I can’t imagine someone who has stolen a credit card going online to make a fraudulent donation to their favorite nonprofit, but credit card companies don’t see it that way.)
- "Why do you require a donation amount of $5? Like any other online credit card processing system we are charged by credit card companies. We don't want donors' well-intended gift to be offset by processing fees."
Interchange fees are seemingly forcing non-profits to violate their processing agreements. Like our retail and ecommerce business and millions of others, we are all precluded from requiring a minimum charge for an electronic transaction. Yes, in the American Red Cross' own words, they require a minimum transaction of $5.00. Does this mean that Visa and MasterCard will withdraw electronic payment support and pull the plug on their network because of this violation? We think not, but it is one more lapse and glaring reason why we question interchange fees. Listed among the 270 page MasterCard Merchant Rules Manual, is this warning the merchants cannot require a minimum transaction amount. [from the MasterCard website page 2-22. "9.12.3 Minimum/Maximum Transaction Amount Prohibited. A merchant must not require, or post signs indicating that it requires, a minimum or maximum transaction amount to accept a valid MasterCard card."]
Let's not just pick on MasterCard. On the Visa site, they have a link and recommendations of various charities that you can make instant donation to, including the American Red Cross. But, there is no mention of the fast that a percent of each transaction is not going to the designated non-profit, but rather being paid in merchant interchange fees. See link. On page 9 of the 135 page Rules For Visa Merchants document, they too explain that "Imposing minimum or maximum purchase amounts in order to accept a Visa card transaction is a violation of the Visa rules."
Remember, when motorists choose credit cards as payment at the pumps, they are typically paying a percent of each fill-up in merchant interchange fees. How can the card associations, along with its thousands of member banks be so conspiring to engage in this windfall profiteering during our nation's economic energy crisis?
Few motorists understand that as gas prices reach new record levels, with crude oil now hitting $91.10, they are more likely forced to pay with plastic, as they simply do not have enough cash. Furthermore, record levels of profiteering is being reaped at their expense.
Where is the outrage?
Is anyone noticing that we are talking about billions of dollars in excessive hidden taxes on service station owners, motorists and our entire economy. The same is true overseas, as other nations face equally exaggerated fuel costs.
Wednesday, October 24, 2007
The question is whether the banks will again conspire to fix interchange rates at an even higher rate to cover their losses? How will they justify the new round of potential hidden merchant taxes? And, will anyone notice?
Also, we are just months from Visa's® planned IPO. If you thought the banks made bank from their selling off a percent of interest in MasterCard®, just wait for its big sister. Visa is three times the size of MasterCard, so the payoff to the banks could be even larger. And, just as with MasterCard's IPO, the Risk Factor warnings are equally as ominous; if we win our litigation, Visa could become insolvent, and a new cookie jar of windfall profiteering will have to be identified by the thousands of member banks that control the world's largest credit card association and electronic payment network.
Thursday, October 18, 2007
So, let us step back and remember the history of technology. Whatever happened to the millions of manual typewriters? How about the IBM Selectric typewriters - which were the staple for most offices just decades ago? The same question can be directed towards the manual credit card imprinters and sizeable carbon copy paper payment receipts?
All are now obsolete.
Today, you can buy a keypad for your computer for a couple of dollars on EBay, but only the Smithsonian in Washington is interested in those antiquated manual credit card imprinters. They all served a purpose, back when interchange fees were cost-based, but, one part is still around. The merchant payment system is still with us, and now amounts to a nearly $40 billion annual hidden tax that few retailers or consumers even understand.
Today, as the banks continue reporting dismal profits, due to the housing sub prime mortgage fiasco and other egregious mismanagement, the interchange boondoggle continues to fill an otherwise failing levee of corporate wretchedness. If it was not for the political and massive financial might of the banking industry (its member banks jointly owned Visa® and MasterCard®), these fees would have nearly disappeared.
Just as how the health care industry got a kick in the head after Michael Moore’s film "Sicko," perhaps that is what Visa and MasterCard needs too.
Today, due to extraordinary political and economic schemes and collusion, the interchange rates in the U.S. are more than double, and often even more than that of collections in other, economically and technologically less developed nations.
Today, their market power is desperately grasping to hold on to these fees, especially when their other sources of revenues are being threatened.
Today, just as the Selectric typewriter and other ancient-like products abdicated to new technologies and innovations, we still have confidence that businesses and consumers will soon wake up and recognize that the banks' electronic payment system are also relics; built on what we assert are illegal, price-fixing schemes to fill their vaults with billions of dollars that are being misdirected due to their absolute market power and price-fixing by agreement.
Whether it is forcing credit card paying motorists to toss over upwards of nearly two-percent of the total cost of a fill-up, to demanding that an inner-city mom, shopping at her local convenience store for a gallon of milk is helping to subsidize the premium affinity cardholders' free mileage trip to the tropics, this must come to an end.
During the previous nearly 800 postings by WayTooHigh.com over the past nearly three years, we have provided news, commentary and updates on what we assert is an extraordinary conspiracy by the Visa and MasterCard associations to wield their market power to fix the price of credit card interchange fees.
Visa is wrong.
MasterCard is wrong.
And, their member banks are wrong.
To quote from the movie "Network," the payments network has enraged merchants, who, like us are mad a hell and are not going to take it any more.
Tuesday, October 16, 2007
Monday, October 15, 2007
Sunday, October 14, 2007
Having just returned from addressing an international photo conference, I asked merchants and retailers I met during a separate visit to London, why their merchant interchange rates are more than half that in the States? The typical reply was one of confusion, especially because electronic payment technology and the card associations' network, they would think, was more advanced in the U.S., and thus should be even lower than their rates, which they too say are way too high.
[Average interchange fees in the UK is about 0.70% and 1.70% in the U.S., respectively].
Wednesday, October 03, 2007
During our trip to Europe, we are eager to get feedback from other retailers to better understand these out-of-control multi-billion dollar charges.
The reason? GREED and unbridled, price-fixing by agreement market power!
Monday, October 01, 2007
Washington, D.C. - October 1, 2007 - The Merchants Payments Coalition today delivered to members of the House Judiciary Committee's Antitrust Task Force a detailed report responding to questions about Visa and MasterCard's hidden credit card interchange fees raised by Representative Ric Keller, R-Fla., at a recent hearing.
"This report separates facts from fiction on credit card interchange practices," said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. "The credit card industry has made numerous questionable statements. We have attempted to set the record straight."
Duncan testified on behalf of the MPC during a July 19 hearing on credit card interchange held by the Antitrust Task Force, arguing that Visa and MasterCard practices in setting interchange rates constitute a violation of federal antitrust laws that costs merchants and consumers more than $40 billion a year. During the hearing, Keller identified a number of key issues on which merchants and witnesses for the credit card industry had made conflicting statements.
Following are key points raised by Keller, and MPC's responses. [Click here] for the full MPC report....
Merchants say Visa and MasterCard keep their operating rules secret, but Visa and MasterCard say the rules are posted on their web sites. Fact: Visa and MasterCard both post excerpts from their rules on their web sites, but not the complete rules needed for a full understanding. Visa offers to show merchants a fuller set of the rules, but only if they sign a non-disclosure agreement prohibiting discussion of what they see.
Merchants say they are not allowed to offer cash discounts, but Visa and MasterCard say cash discounts are allowed. Fact: Federal law prohibits a ban on cash discounts, but credit card company rules make cash discounts extremely difficult to offer. Visa in particular has attempted to characterize some cash discounts as a prohibited surcharge on credit card use, and has threatened some merchants with fines of $5,000 a day for offering cash discounts.
Merchants say interchange rates are non-negotiable, while Visa and MasterCard say they can be negotiated. Fact: Merchants are not part of the process when interchange rates are set and cannot negotiate interchange rates with Visa or MasterCard. Courts have held that Visa and MasterCard dominate the credit card market, and the Kansas City Federal Reserve found that the popularity of cards among consumers gives merchants no realistic choice but to accept Visa and MasterCard regardless of rates.
Merchants say interchange fees hurt consumers while Visa and MasterCard say interchange fees benefit consumers. Fact: Interchange fees do pay for rewards programs offered by credit cards, but the fees mean that all consumers pay for rewards whether they take advantage of them or not. All consumers shoulder the burden of interchange as the fees are passed along in higher prices, with the average family paying an extra $300 because of interchange fees in 2006.
Visa and MasterCard claim retailers are asking for price controls, while retailers say they want only competition. Fact: Merchants have not advocated price controls, either in testimony before Congress or in meetings with members of Congress. Claims that merchants are advocating price controls are false.
Visa and MasterCard say retailers who accept any Visa credit card should be required to accept all Visa credit cards and the same for MasterCard, while retailers say they should be allowed to choose which cards to accept. Fact: Visa and MasterCard each have an "honor all cards" rule requiring merchants who accept any credit cards under the Visa name or MasterCard name to accept all credit cards issued under that name. Merchants believe this is a key part of the problem, because even if banks competed to offer lower interchange rates, merchants would still be required to accept those with high interchange rates. Also, card issuers do not currently provide merchants with the information necessary to know the exact interchange rate being charged when a card is presented at the register.
The MPC is a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees. For more information, visit www.unfaircreditcardfees.com.
[Source: MPC, press release]
Saturday, September 29, 2007
As gas prices continue to soar, so too is interchange fee profiteering, due to what we assert are illegal price-fixing by agreement and absolute market power (Visa and MasterCard's network controls about 80% of the electronic payment business).
Rather than rescinding their unjustified hidden-taxes on motorists and our entire economy, we are alarmed to learn that, according to The Wall Street Journal (page 1. Sept 29) [click here to read the article - subscription required], gas prices could rise to $100.00 a barrel. The two WSJ reporters, Peter Fritsch and Kelly Evans, explained how the U.S. economy could withstand $100 a barrel oil, but they were absent in also mentioning exactly what that stratospheric rate would do to the banks' bottom line. Nor did they explain how the banks can possibly justify this extraordinary profiteering as our nation faces such a burdensome economic energy crisis.
Forget, for a moment, ExxonMobil and other gas companies' earnings, and pause to ask why exactly are credit card interchange fees based on a percent of each sale? Even Realtors are dealing and lowering their once standard 6% commissions; in this case the banks are reaping about 1.7% off the top from every credit card charge at the pumps. Could they be earning as much as $2.00 - $3.00 from every fill-up, especially as motorists are now more inclined to use plastic, as they do not have enough cash on hand?
Last year, MasterCard announced they were instituting a $50.00 interchange fee cap at the pumps. Visa, however, has been silent on the issue, and we are unsure whether the fee limit by MasterCard ever took effect.
Either way, since many of the same banks which control MasterCard, also have stakes in Visa, it is really a giant shell game anyway.
Friday, September 28, 2007
WayTooHigh.com - The Credit Card Interchange Report has been providing daily news and commentary updates on our battle against merchant interchange fees for nearly 2 1/2 years, but our cause is not just domestic within the United States. EuroCommerce is hosting an outstanding website that further cements the critical multi-billion dollar issues that affects all retailers in Europe and across the globe. Next month, we [30 Minute photos Etc. and ScanMyPhotos.com] will be attending and speaking at a photo industry convention in the UK and will be interested in gaining first-hand prospectives from other retailers on how the interchange extortion is affecting them as well.
The below highlights are from the StopUnfairCardFees.eu website. Click here to read more.
- Did you know? Visa and MasterCard argue that the hidden fees - which cost Europe €25 billion every year - are essential to run card schemes. Why then are there some card schemes in Europe which operate successfully without hidden ‘interchange’ fees?
- “My bank told me the fee covers processing costs for Visa and MasterCard. But I read that only 13% of the fees go toward these costs, with the rest going to bank profits, and rewards for the select few cardholders. What’s the deal?”
- Europe’s retailers want the best for Europe’s shoppers – in terms of price, quality, service and choice. But prices in Europe are artificially inflated because of hidden fees for debit and credit cards – fees which all shoppers end up paying for. We believe Europe’s shoppers have the right to know …
- What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
- According to US Senator Arlen Specter: “We may need to modify our antitrust laws to stop credit card companies from engaging in activities to gouge and jack up prices.”
- According to Philip Lowe, Assistant Governor of the Reserve Bank of Australia: “These fees are not subject to the normal forces of competition and in the RBA’s view were distorting the use of payment methods in Australia.”
- MasterCard and Visa and their interchange fees have also aroused the interest of regulatory authorities and central banks in a range of further countries across the world. These include: Brazil, Columbia, Mexico, South Africa, Singapore, Switzerland, and Israel.
- What is happening in Europe is not an isolated case. Visa, MasterCard and the banks that hide behind them try around the world to continue and spread their anti-competitive activities. Yet in some countries, they are no longer able to get away with it.
- Why is it anti-competitive? Unless constraints are imposed by regulators, payment card companies and their banks can increase interchange rates at any time by any amount. In the words of the European Competition Commissioner, Neelie Kroes, “these high fees are a result of a lack of competition in a market where 95% of cross border payments in Europe are made by two companies. The situation is even bleaker in some Member States, where there is only one single acquiring bank servicing retailers.”
- Why are interchange fees unfair? First of all, Visa and MasterCard do not inform customers of these interchange fees, they simply set them with the banks behind them and charge retailers and their shoppers accordingly. We believe you have the right to know more about these fees. It is even more unfair for shoppers who do not use the credit or debit cards. That’s because these hidden fees are not charged just to cardholders - that is forbidden the rules of by some card schemes and banks. The high cost of card payments must be passed on across all purchases. This drives up the cost of goods and services for all consumers whether they pay with plastic or cash. This has a serious knock on effect for the wider economy.
- What’s it about? Whether you use a credit card or not, you pay a hidden fee on virtually every transaction you make. The fees have an inflationary effect and they add up. They cost European shoppers tens of billions of Euros every year.
[Source: Above abstracts from StopUnfairCardFees.eu]
Wednesday, September 26, 2007
Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year! (WayTooHigh.com)
To be more transparent and divulge just how ghoulish this hidden tax is, Visa® and MasterCard® should post the exact interchange fee for each transaction as a separate item on every debit and credit card receipt. We first raised this issue in January, 2006, but they seem too busy figuring out how to go public to distance the banks from our alleged antitrust violations. If they would only pause from what we assert is their attempt to pass along the liability from this litigation onto the public, and instead, agree to post the exact interchange fees on every receipt, then, all merchants and cardholders would understand why we are so passionate about this issue. There would no longer be a hidden tax, but, rather a very vocal cascade of resistance against the peddlers of these unfair fees.
Why are the merchant interchange fees about 1.7% in the U.S. and as low as zero in other nations? And, as other electronic transactions have been slashed too rock-bottom, why have some of their rates [ex. debit cards] tripled in the past 8-years?
Let us pause for a brief study break and review the historical way of sending ["transmitting"] a traditional letter and the processing of a charge slip. In the previous decade, if you wanted to send a letter, you generally bought stationary, an envelope, postage and drove to the Post Office to mail it; days later it was received. Also about ten years ago, merchants, like us, had to stock up on thick, multi-page, carbon-copy charge card receipts, swipe the payment cards through a manual imprinter, mail it to the processing company on the other coast [Florida]. Then, days later, the transaction - less a substantially lower interchange fee than today - was credited to your bank account. As technology advanced, instead of lowering interchange fees, it has actually leaped ahead.
Today, we all use email, and essentially, it is free. Could you imagine if the two leading credit card associations and its thousands of member banks were also involved with the exploration of the Internet? Using their surreptitious market power and pricing domination, every electronic [email] "letter" would come with a beefed-up fee. But, the actual cost to use the Internet network to transmit an electronic message, must be about the same as the cost to transmit an electronic payment on its network, so why are the banks still granted the potency to exert such immense multi-billion-dollar hidden taxes on merchants, cardholders and our economy?
Sunday, September 23, 2007
Hundreds of years ago, during Holland's speculative tulip bulb craze that gripped the nation, the laws of economics prevailed and the market for flowers collapsed. During the closing days of the last decade, we again witnessed a market failure from the Internet "dot.com" fiasco. This summer, it was the unchecked financial policies that led to our nation's housing predicament.
Where were the regulators when U.S. President Bush was encourage home ownership? Now, we are saddled with billions of dollars in losses because greed by the financial institutions was elevated above smart planning.
The same thing is again happening with merchant interchange fees.
Due to the banks' unbridled pricing controls over merchant interchange fees, what use to be cost-based is today a fiefdom for non-stop rate increases that retailers and consumers are unable to control. There are no checks to this madness; Visa®, MasterCard® and its thousands of member banks are today's new enemies battling its two core customers - retailers and cardholders. At least with the tulip craze in the early 1700s, there was a fragrant aroma, while today's threatening interchange fees and its electronic payment network is nothing more than a rotten, unfair conspiracy to unlawfully fix prices.
Studying MasterCard and now Visa's IPO "Risk Factors" says it all and flashes the most serious of warnings as they foreshadow what might just happen: the two leading credit card associations could become "insolvent" ["Interchange fees are often the largest component of the costs that acquirers charge merchants in connection with the acceptance of payment cards," according to Visa's SEC filing]
If our class action prevails in this antitrust litigation, the same outcome as with tulip bulbs in Holland, Internet stocks on Wall Street and the housing prices in southern California and other speculative markets might just be a giant foreshadowing of what could happen to this interchange fee debacle.
Today, there is little justification for any interchange fee, let alone upwards of $40 billion dollars each year.
Today's market power of the general purpose card network is without justification. Just look at other nations, even those less industrialized ones and ask why their interchange fees are so much lower than the 1.7% in the U.S.
And, why again are interchange fees for the very costly check writing and clearing process also zero in the U.S.?