Upon returning from Orlando, where I addressed the International Photo Marketing Association convention and a separate group of executives from a national portrait studio chain, I was immersed in nonstop celebratory cheers for taking on this interchange litigation.
Rather than reveling in the admiration, I was more weary due to a recent WayTooHigh.com posting where a consultant, published in a magazine, argued that the banks need to begin finding a voice to advocate on their behalf. Thus, this was more of an eye in the center of a thunderous storm cloud.
As the banks bunker behind walls fortified by high-paid PR and advocacy experts, I gathered with thousands of real people. No suits and ties, just ordinary retailers, from single-store to giant chains from across the globe. What I encountered at the convention was an endless number of stories about interchange. People were supportive and congratulating me for the antitrust litigation.
The banks had few friends among this group. But, they did when I arrived at the hotel.
By way of coincidence, a major bank, which is also a named defendant, was having a conference there. I kept to myself until I ran into a familiar and dear friend who previously worked at the Eastman Kodak Company. Although his new role as senior VP for that bank caused us to have a brief reintroduction, it was a wonderful opportunity to reminisce and share all the new technologies helping to re-energize the photo imaging business. Sydney, during the Summer Olympics was the last time we saw each other, so, there was much to catch up on.
Toward the end of our chat, I explained that I had some news that might cause some discomfort. I shared my title in the battle against the banks and, like a deer-in-the-headlights, he backed up. The first reaction was more of an impulse because he quipped that me and nearly everyone else are lined up against the banks. But, I then explained my role as class representative and the first to file a legal complaint. When he asked if I was blogging, I explained my additional involvement as co-editor of WayTooHigh.com - The Credit Card Interchange Report.
Being precluded from conversing with defendants, the conversation ended. But not before he tried to explain his bank's challenge in facing several billion dollars in annual fraud charges and I guess the rational for justifying their interchange fees. With more than two-hundred previous postings, it is clear that the real issue still is not the focus of their argument. The fact of law is that it is illegal to fix prices.
Besides, the fraud rates are lower in the United States than abroad in some nations where the interchange fee is half the rates in the States. As the banks mail out over 5-billion direct mail solicitations each year, you would think they would attempt to limit their fraud exposure by limiting the solicitations so non-credit worthy cardholders would cease adding to the costs shouldered by retailers and consumers. With advanced technology today that wasn't available when manual credit card imprinters were used this argument is deflated. Seemingly, the banks are treating interchange like a giant roulette wheel - if they loose they have merchants cover their exposure. This strategy sounds similar to MasterCard's postponed IPO, where the investors could have been burdened with the potential exposure from the legal liabilities too.
We both realized the conversation had come to an end, smiled and wished each other well. And, I still think the world of him because I have always admired his intellectual and compassionate strengths. He was a recognized leader at Kodak and one of the first executives I met years ago who shared my vision for celebrating diversity of people and ideas.
[source: WayTooHigh.com commentary]
Tuesday, February 28, 2006
Wednesday, February 22, 2006
Interchange Fee Battle: Time to Step Back? (BIA Online)
Is it time to take the fight over interchange fees out of the courts before it does real harm to the credit card associations and their member banks?
Consultant Steve Mott answered that question with a resounding “yes” on Monday as he warned banks they had better find a voice for themselves, bring this debate out into the open and let cooler heads prevail before ongoing litigation and impending merchant defection to non-bank payment products makes the situation even more adversarial.
Until the issues can be openly and ingenuously examined and thrashed out to the satisfaction of all stake-holders, the prognosis could be calamitous,” said Mott, principal of Stamford, Conn.-based consultancy BetterBuyDesign in a BAI Payments Forum session entitled “Interchange – Where Do the Opportunities and Challenges Lie?
”The battle over growing interchange income from signature-based card products has pushed the associations and several of their member banks into a bruising string of legal battles with merchants. Mott suggested that an independent arbiter – perhaps the Fed – referee an examination of costs and value for credit card payments and “start a process of rationalization before merchants abandon bank networks and products en masse and the pricing of payments plummets below levels from which financial institutions can sustain any profits.”
Mott said interchange levels have grown from 1.2% of purchases in 1990 to 1.75% today and now account for $24 billion in annual profits, which continue to grow rapidly. Card-issuing banks contend they need these fee levels to continue expanding market acceptance and especially to compensate themselves for the resources they pour into increasingly popular rewards programs.
But merchants argue that broad market acceptance has already been achieved – few of them can afford NOT to accept bank cards for payment – and there’s no incremental benefit from rewarding consumers to use particular brands of cards, since most consumers who get the rewards are non-revolvers and therefore don’t need credit to make their purchases.
[source: BAI: Banking Stratagies]
Consultant Steve Mott answered that question with a resounding “yes” on Monday as he warned banks they had better find a voice for themselves, bring this debate out into the open and let cooler heads prevail before ongoing litigation and impending merchant defection to non-bank payment products makes the situation even more adversarial.
Until the issues can be openly and ingenuously examined and thrashed out to the satisfaction of all stake-holders, the prognosis could be calamitous,” said Mott, principal of Stamford, Conn.-based consultancy BetterBuyDesign in a BAI Payments Forum session entitled “Interchange – Where Do the Opportunities and Challenges Lie?
”The battle over growing interchange income from signature-based card products has pushed the associations and several of their member banks into a bruising string of legal battles with merchants. Mott suggested that an independent arbiter – perhaps the Fed – referee an examination of costs and value for credit card payments and “start a process of rationalization before merchants abandon bank networks and products en masse and the pricing of payments plummets below levels from which financial institutions can sustain any profits.”
Mott said interchange levels have grown from 1.2% of purchases in 1990 to 1.75% today and now account for $24 billion in annual profits, which continue to grow rapidly. Card-issuing banks contend they need these fee levels to continue expanding market acceptance and especially to compensate themselves for the resources they pour into increasingly popular rewards programs.
But merchants argue that broad market acceptance has already been achieved – few of them can afford NOT to accept bank cards for payment – and there’s no incremental benefit from rewarding consumers to use particular brands of cards, since most consumers who get the rewards are non-revolvers and therefore don’t need credit to make their purchases.
[source: BAI: Banking Stratagies]
Tuesday, February 21, 2006
Interchanging Commentary Pending
The co-editor of WayTooHigh.com - The Credit Card Interchange Report had been asked to provide the March cover-page commentary in a major financial publication. We will have a link online within a few days.
[Update, 03-01-06. Click here for link]
[Update, 03-01-06. Click here for link]
Sunday, February 19, 2006
"Lobbyists Trade Charges of Extortion in Fee Fight" (The Hill)
Two high-profile lobbying coalitions traded charges of extortion before a powerful House panel yesterday, dragging their clash over credit cards’ “interchange fees” into the open.
Merchants pay interchange fees whenever a consumer swipes a credit card, with the fee covering credit-card operating costs and guaranteeing card issuers instant, real money to back up the purchase. But merchants have struck back at credit cards and banks, charging the financial-services giants with fixing the interchange fees and asking Congress to slash or eliminate interchange.
Click here to view entire article.
[source: The Hill, The Newspaper for and about the U.S. Congress]
Merchants pay interchange fees whenever a consumer swipes a credit card, with the fee covering credit-card operating costs and guaranteeing card issuers instant, real money to back up the purchase. But merchants have struck back at credit cards and banks, charging the financial-services giants with fixing the interchange fees and asking Congress to slash or eliminate interchange.
Click here to view entire article.
[source: The Hill, The Newspaper for and about the U.S. Congress]
Thursday, February 16, 2006
MasterCard ® IPO Delayed
What we understood was going to occur before April, 2006, has now been postponed until as late as the end of June. MasterCard, Inc.® announced today that what has turned into a very controversial initial public offering which may raise $2.5 billion will partly be delayed due to a recent medical diagnosis of its president and CEO, Bob Selander. Many we have talked with thought the reason provided minimally was reaching, especially because multi-billion dollar international corporations are bigger than any one person. We continue to speculate that what initially is a postponement, may turn out to be a cancellation as more details on the IPO are understood.
[source: WayTooHigh.com]
Discover ® Debit Card Challenges Visa® and MasterCard ® (Consumer Affairs)
By Martin H. Bosworth, ConsumerAffairs.Com
Two recent actions involving the Discover Financial Services company have positioned it to challenge Visa and MasterCard for dominance in the multibillion-dollar credit and debit card market, and have raised the stakes in the battle between banks, merchants, and consumers over the hidden fees involved in using plastic for purchases.
Discover announced that it was introducing Discover Debit, its own debit card brand, to compete with Visa and MasterCard's debit offerings and increase its profile as a full-service payment company.
In a statement announcing the venture on Feb. 13th, Discover CEO David W. Nelms touted the move as "a highly appealing alternative for financial institutions, merchants and consumers." "The launch of Discover Debit builds on this with a new, uncomplicated approach to signature debit that provides convenience and broad acceptance to cardholders," said Nelms, "as well as security and competitive program features to financial institutions."
Discover touted its new card as offering more attractive features than the competition, including zero liability in case of fraud, clear pricing and billing rules, and better security.
Most attractive to merchants, however, was Discover's announcement that it would be dropping its "No Surcharge" rule when processing merchant transactions.
The "No Surcharge" rule prevented merchants from passing the costs of card transactions on to consumers via tacking on extra fees. Merchants, in turn, have to pay higher "interchange" fees when processing card transactions, and end up making less money than when customers pay cash.
Discover Financial agreed to drop its "No Surcharge" rule in negotiations over a merchant-backed class action suit against the rule, and was dropped from the suit.
Leveling the Playing Field
Discover's actions are a direct challenge to Visa and MasterCard's dominance in the credit and debit market, coming at a time of increasing consumer awareness of the "hidden fees" they pay to use credit and debit cards.
The "No Surcharge" class action suit is being combined with a separate class action suit challenging Visa and MasterCard's control of interchange fees for merchants.
Photo shop owner Mitch Goldstone is one of the principal litigants in the interchange fee lawsuit. He hailed Discover's dropping of the "No Surcharge" rule as a smart move, and predicted that "Discover Financial is poised to garner substantial support from merchants and consumers."
Goldstone has repeatedly targeted Visa and MasterCard for what he has called "illegal price fixing," through setting excessive processing fees that merchants have to pay when customers use plastic instead of cash. "While Visa and MasterCard have their heads in the sand, Discover made a brilliant marketing coup which is getting noticed by retailers and cardholders, " Goldstone said.
Discover Financial is owned by New York-based securities and investment firm Morgan Stanley. The firm recently agreed to pay $15 million as part of a settlement with the Securities & Exchange Commission (SEC) for failing to retain e-mail records of its activities.
[source: ConsumerAffairs.com]
Two recent actions involving the Discover Financial Services company have positioned it to challenge Visa and MasterCard for dominance in the multibillion-dollar credit and debit card market, and have raised the stakes in the battle between banks, merchants, and consumers over the hidden fees involved in using plastic for purchases.
Discover announced that it was introducing Discover Debit, its own debit card brand, to compete with Visa and MasterCard's debit offerings and increase its profile as a full-service payment company.
In a statement announcing the venture on Feb. 13th, Discover CEO David W. Nelms touted the move as "a highly appealing alternative for financial institutions, merchants and consumers." "The launch of Discover Debit builds on this with a new, uncomplicated approach to signature debit that provides convenience and broad acceptance to cardholders," said Nelms, "as well as security and competitive program features to financial institutions."
Discover touted its new card as offering more attractive features than the competition, including zero liability in case of fraud, clear pricing and billing rules, and better security.
Most attractive to merchants, however, was Discover's announcement that it would be dropping its "No Surcharge" rule when processing merchant transactions.
The "No Surcharge" rule prevented merchants from passing the costs of card transactions on to consumers via tacking on extra fees. Merchants, in turn, have to pay higher "interchange" fees when processing card transactions, and end up making less money than when customers pay cash.
Discover Financial agreed to drop its "No Surcharge" rule in negotiations over a merchant-backed class action suit against the rule, and was dropped from the suit.
Leveling the Playing Field
Discover's actions are a direct challenge to Visa and MasterCard's dominance in the credit and debit market, coming at a time of increasing consumer awareness of the "hidden fees" they pay to use credit and debit cards.
The "No Surcharge" class action suit is being combined with a separate class action suit challenging Visa and MasterCard's control of interchange fees for merchants.
Photo shop owner Mitch Goldstone is one of the principal litigants in the interchange fee lawsuit. He hailed Discover's dropping of the "No Surcharge" rule as a smart move, and predicted that "Discover Financial is poised to garner substantial support from merchants and consumers."
Goldstone has repeatedly targeted Visa and MasterCard for what he has called "illegal price fixing," through setting excessive processing fees that merchants have to pay when customers use plastic instead of cash. "While Visa and MasterCard have their heads in the sand, Discover made a brilliant marketing coup which is getting noticed by retailers and cardholders, " Goldstone said.
Discover Financial is owned by New York-based securities and investment firm Morgan Stanley. The firm recently agreed to pay $15 million as part of a settlement with the Securities & Exchange Commission (SEC) for failing to retain e-mail records of its activities.
[source: ConsumerAffairs.com]
Wednesday, February 15, 2006
Lawmakers Hear More Interchange Arguments (Cardline)
Representatives of retailers and electronic payment groups testified for and against government interchange restrictions before the U.S. House Subcommittee on Commerce, Trade and Consumer Protection today.
Henry O. Armour, president and CEO of the National Association of Convenience Stores, testified that convenience store owners see a few basic operating rules when they sign agreements with acquiring banks to accept Visa and MasterCard but are kept in the dark about most rules until they break them and receive chargebacks or higher interchange fees.
For example, contracts merchants sign with acquirers stipulate that they aren't supposed to set minimum or maximum purchase amounts for credit card use, but the full operating agreements that they aren't allowed to see include maximum purchase limits for gasoline. Those hidden rules lead to chargebacks, he said. "The merchant can't restrict, but Visa and MasterCard reserve the right not to pay you if it's over $50 [for gasoline]," he said.
Armour wants the subcommittee to press Visa and MasterCard member banks to provide full copies of operating rules to lawmakers studying interchange fees. He said retailers in the U.S. should see lower interchange fees than elsewhere, since they generate the most transactions in the world and maintain one of the lowest fraud rates.
Edward Mierswinski, consumer program director of the U.S. Public Interest Research Group, advocated more studies of merchant and cardholder rules, interchange and how interchange cost is shared by consumers. "I personally don't think that Joe Cash Customer, who can't afford a bank account, should be paying for Jane Frequent Flyer Miles," he said. "The rules [issuers] give to consumers are 'we can change the rules any time we want for any reason, including no reason.'"
Representing the Electronic Payments Coalition, former Federal Trade Commission Chairman Timothy J. Muris, now an attorney with O'Melveny & Myers LLP in Washington, called merchant claims of price fixing disingenuous. "What the merchants want instead is a price fix, but a price fixed at a lower amount," Muris said. He also argued that individual retailers negotiate a variety of interchange fees with their acquiring banks, so prices aren't really fixed.
Ranking minority member Rep. Janice Schakowsky (D-IL), appeared to agree with Armour and Mierzwinski that interchange fees are too high and affect consumers adversely. "Whatever the courts decide, I think it's our committee's responsibility to make sure that consumers are not saddled with more fees."
Others, such as Rep. Michael Ferguson (R-NJ), expressed a general distaste for price controls. "I'm suspicious of governments telling markets how much to charge," Ferguson said. Most committee members who spoke seemed sympathetic to, or at least intrigued by, Armour's assertion that retailers should have more complete access to the rules that govern their interchange fees and chargebacks and be able to freely communicate card costs to customers. "I believe in transparency, so consumers can decide what [payment methods] are right for them," Ferguson said.
[source: Cardline]
Henry O. Armour, president and CEO of the National Association of Convenience Stores, testified that convenience store owners see a few basic operating rules when they sign agreements with acquiring banks to accept Visa and MasterCard but are kept in the dark about most rules until they break them and receive chargebacks or higher interchange fees.
For example, contracts merchants sign with acquirers stipulate that they aren't supposed to set minimum or maximum purchase amounts for credit card use, but the full operating agreements that they aren't allowed to see include maximum purchase limits for gasoline. Those hidden rules lead to chargebacks, he said. "The merchant can't restrict, but Visa and MasterCard reserve the right not to pay you if it's over $50 [for gasoline]," he said.
Armour wants the subcommittee to press Visa and MasterCard member banks to provide full copies of operating rules to lawmakers studying interchange fees. He said retailers in the U.S. should see lower interchange fees than elsewhere, since they generate the most transactions in the world and maintain one of the lowest fraud rates.
Edward Mierswinski, consumer program director of the U.S. Public Interest Research Group, advocated more studies of merchant and cardholder rules, interchange and how interchange cost is shared by consumers. "I personally don't think that Joe Cash Customer, who can't afford a bank account, should be paying for Jane Frequent Flyer Miles," he said. "The rules [issuers] give to consumers are 'we can change the rules any time we want for any reason, including no reason.'"
Representing the Electronic Payments Coalition, former Federal Trade Commission Chairman Timothy J. Muris, now an attorney with O'Melveny & Myers LLP in Washington, called merchant claims of price fixing disingenuous. "What the merchants want instead is a price fix, but a price fixed at a lower amount," Muris said. He also argued that individual retailers negotiate a variety of interchange fees with their acquiring banks, so prices aren't really fixed.
Ranking minority member Rep. Janice Schakowsky (D-IL), appeared to agree with Armour and Mierzwinski that interchange fees are too high and affect consumers adversely. "Whatever the courts decide, I think it's our committee's responsibility to make sure that consumers are not saddled with more fees."
Others, such as Rep. Michael Ferguson (R-NJ), expressed a general distaste for price controls. "I'm suspicious of governments telling markets how much to charge," Ferguson said. Most committee members who spoke seemed sympathetic to, or at least intrigued by, Armour's assertion that retailers should have more complete access to the rules that govern their interchange fees and chargebacks and be able to freely communicate card costs to customers. "I believe in transparency, so consumers can decide what [payment methods] are right for them," Ferguson said.
[source: Cardline]
A Bit of Unbridled Humor (WayTooHigh.com)
Interestingly, WayTooHigh.com - The Credit Card Interchange Report has identified that what appears to be one of the most popular page site visits by the banks, their agents, advocacy, PR and legal representatives is the one from Jan 7th titled: "Banks Silence is Deafening."
[source: WayTooHigh.com]
[source: WayTooHigh.com]
Retailers Welcome Hearing on Secret Credit Card Fees (NRF)
WASHINGTON, Feb. 15 /PRNewswire/ -- The National Retail Federation welcomed a congressional hearing being held today on nearly $40 billion in secret fees that credit card companies force merchants to pass on to consumers annually, saying the hearing could lead consumers to demand that credit card companies disclose and reduce the fees.
click here for more info.
[source: National Retail Federation]
click here for more info.
[source: National Retail Federation]
Olympic spectators in Torino, Italy to pay half the U.S. interchange rate. Why? (WayTooHigh.com)
[repost, 2-15-06] The Italian name for one of the charming Olympic emblems is "Neve." Because of Visa's role as Olympic partner, the English translation should be "Nerve," as in the nerve or audacity of the world's largest credit card company to charge people in the United States nearly twice the interchange fee as in Italy. One Visa U.S.A. Olympic TV spot asks, "What are you waiting for?" We ask them the very same question.
Ticket sales to the Winter Olympics are dismal and, according to a Jan 13th Wall Street Journal editorial, there will be near empty grandstands and there are fears that the "whole caboodle could go bankrupt."
The Wall Street Journal reported earlier that "The Winter Olympics in Turin, Italy, have generated such little buzz that there are still thousands of tickets unsold and plenty of hotel vacancies."
As a worldwide sponsor and global partner of the Olympic Games, this might be Visa International's lesser problem. Another concern is why the world's leading payment solutions organization charges merchants in Torino, Italy nearly half* the interchange fees faced by retailers in the United States?
Click here to view recent postings on Italian interchange fees.
[source: WayTooHigh.com]
* source: July 2005, NACS Magazine, page 22, "Card Costs 2004, MPC"
Ticket sales to the Winter Olympics are dismal and, according to a Jan 13th Wall Street Journal editorial, there will be near empty grandstands and there are fears that the "whole caboodle could go bankrupt."
The Wall Street Journal reported earlier that "The Winter Olympics in Turin, Italy, have generated such little buzz that there are still thousands of tickets unsold and plenty of hotel vacancies."
As a worldwide sponsor and global partner of the Olympic Games, this might be Visa International's lesser problem. Another concern is why the world's leading payment solutions organization charges merchants in Torino, Italy nearly half* the interchange fees faced by retailers in the United States?
Click here to view recent postings on Italian interchange fees.
[source: WayTooHigh.com]
* source: July 2005, NACS Magazine, page 22, "Card Costs 2004, MPC"
Tuesday, February 14, 2006
Merchants Welcome Congressional Hearing on Secret Fees Charged by Credit Card Companies (Merchants Payments Coalition)
WASHINGTON, Feb. 14 /PRNewswire/ --
The Merchants Payments Coalition today welcomed plans to hold a congressional hearing this week on secret fees totaling almost $40 billion annually that credit card companies charge toconsumers each time a credit or debit card is used to make a purchase.
"Consumers already know about a lot of the fees they're charged by creditcard companies," MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation, said. "They know about the interest they pay and the late charges and the over-limit charges and all theother fees credit card companies seem to charge just because they can. What they don't know is that credit card companies are charging them a secret checkout fee every time they use their cards. This hearing is going to help bring that secret fee into the spotlight and let consumers know just how muchmoney credit card companies are taking out of their pockets behind their backs."
"Credit card interchange fees are a top concern for U.S. convenience andpetroleum retailers and a diverse coalition of merchants," National Association of Convenience Stores President and CEO Henry O. Armour said. "There has not been nearly enough information and discussion about these fees in the past, so this hearing is an important step toward informing Congress and the public about the impact that high interchange rates have on U.S.consumers." Armour is scheduled to testify when the House Energy and CommerceCommittee's Subcommittee on Commerce, Trade and Consumer Protection holds a hearing on "The Law and Economics of Interchange Fees" at 10 a.m. Wednesday.
NACS is one of the founding members of the MPC. The subject of the hearing is interchange, a secret fee of about 2 percent that Visa, MasterCard and their member banks charge consumers each time acredit or debit card is used. Visa and MasterCard's non-negotiable contracts with merchants require that the fee be built into the advertised price ofmerchandise, forbid the fees from being shown on receipts, and effectively block cash discounts from being offered in most situations. Other credit card companies don't charge interchange as such because of differences in the way payments are handled, but nonetheless charge similar fees to process transactions.
Visa and MasterCard alone collected $27.6 billion in interchange fees during 2004, while transaction fees charged by other credit card companies brought the total to $39.2 billion, according to MPC figures.
Visa and MasterCard kept interchange fees largely secret for years, but the issue has emerged as a major public policy concern in the past year. The Federal Reserve held a conference on the subject last May, and the House last fall passed legislation -- still pending in the Senate -- that would have required a Federal Trade Commission investigation into interchange's role in rising gasoline prices.
Nearly 50 lawsuits have been filed in federal court claiming that interchange practices violate federal antitrust law.
The Merchants Payments Coalition was formed last year by trade associations representing retailers, restaurants, supermarkets, drug stores,convenience stores, gas stations, on-line merchants and other businesses that accept credit and debit cards and are concerned about the increasing interchange fees charged by banks and credit card companies to process credit and debit transactions.
Coalition members include the American Petroleum Institute, the Food Marketing Institute, the International Association of Airport Duty-Free Stores, the National Association of Chain Drug Stores, the National Association of College Stores, the National Association of Convenience Stores, the National Association of Theater Owners, the National Council of Chain Restaurants, the National Grocers Association, the National Restaurant Association, the National Retail Federation, NATSO (the National Associationof Travel Plazas and Truckstops), the Petroleum Marketers Association of America, the Retail Industry Leaders Association, and the Society of Independent Gasoline Marketers.
SOURCE Merchants Payments Coalition - www.nrf.com
The Merchants Payments Coalition today welcomed plans to hold a congressional hearing this week on secret fees totaling almost $40 billion annually that credit card companies charge toconsumers each time a credit or debit card is used to make a purchase.
"Consumers already know about a lot of the fees they're charged by creditcard companies," MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation, said. "They know about the interest they pay and the late charges and the over-limit charges and all theother fees credit card companies seem to charge just because they can. What they don't know is that credit card companies are charging them a secret checkout fee every time they use their cards. This hearing is going to help bring that secret fee into the spotlight and let consumers know just how muchmoney credit card companies are taking out of their pockets behind their backs."
"Credit card interchange fees are a top concern for U.S. convenience andpetroleum retailers and a diverse coalition of merchants," National Association of Convenience Stores President and CEO Henry O. Armour said. "There has not been nearly enough information and discussion about these fees in the past, so this hearing is an important step toward informing Congress and the public about the impact that high interchange rates have on U.S.consumers." Armour is scheduled to testify when the House Energy and CommerceCommittee's Subcommittee on Commerce, Trade and Consumer Protection holds a hearing on "The Law and Economics of Interchange Fees" at 10 a.m. Wednesday.
NACS is one of the founding members of the MPC. The subject of the hearing is interchange, a secret fee of about 2 percent that Visa, MasterCard and their member banks charge consumers each time acredit or debit card is used. Visa and MasterCard's non-negotiable contracts with merchants require that the fee be built into the advertised price ofmerchandise, forbid the fees from being shown on receipts, and effectively block cash discounts from being offered in most situations. Other credit card companies don't charge interchange as such because of differences in the way payments are handled, but nonetheless charge similar fees to process transactions.
Visa and MasterCard alone collected $27.6 billion in interchange fees during 2004, while transaction fees charged by other credit card companies brought the total to $39.2 billion, according to MPC figures.
Visa and MasterCard kept interchange fees largely secret for years, but the issue has emerged as a major public policy concern in the past year. The Federal Reserve held a conference on the subject last May, and the House last fall passed legislation -- still pending in the Senate -- that would have required a Federal Trade Commission investigation into interchange's role in rising gasoline prices.
Nearly 50 lawsuits have been filed in federal court claiming that interchange practices violate federal antitrust law.
The Merchants Payments Coalition was formed last year by trade associations representing retailers, restaurants, supermarkets, drug stores,convenience stores, gas stations, on-line merchants and other businesses that accept credit and debit cards and are concerned about the increasing interchange fees charged by banks and credit card companies to process credit and debit transactions.
Coalition members include the American Petroleum Institute, the Food Marketing Institute, the International Association of Airport Duty-Free Stores, the National Association of Chain Drug Stores, the National Association of College Stores, the National Association of Convenience Stores, the National Association of Theater Owners, the National Council of Chain Restaurants, the National Grocers Association, the National Restaurant Association, the National Retail Federation, NATSO (the National Associationof Travel Plazas and Truckstops), the Petroleum Marketers Association of America, the Retail Industry Leaders Association, and the Society of Independent Gasoline Marketers.
SOURCE Merchants Payments Coalition - www.nrf.com
Visa and MasterCard Reinvent Themselves Amidst Lawsuits and Competition (ETA)
Click here to view comprehensive Jan 2006 cover story from the Electronic Transactions Association's publication, "Transaction Trends."
Monday, February 13, 2006
MasterCard and Visa Face Mosaic Avalanche (WayTooHigh.com)
Like a snowy mountainside about to crash downward, Visa and MasterCard are facing a chilly mosaic avalanche. By now, we anticipated full-page Wall Street Journal advertisements and a loud advocacy campaign attacking us, but instead, silence.
The banks which control and own the two leading credit card associations are feeling the furry from merchants and cardholders. First, they lost their choice of judges and court venues to hear the antitrust litigation. Then, MasterCard tried to have the lead attorney and law firm disqualified, then their competitor, Discover Card announced a settlement.
Seemingly, each day brings more news that cripples their former reign of illegal price-fixing. What seemed like twice each year, Visa and MasterCard's board met to set prices by agreement. But lately they caught on that their customers will not tolerate any more increases. With their two core customers (merchants and consumers) engaged in a ocean-sized war against unbridled interchange charges, the news is grim and we are here with daily updates and commentary to keep you updated.
[source: WayTooHigh.com]
The banks which control and own the two leading credit card associations are feeling the furry from merchants and cardholders. First, they lost their choice of judges and court venues to hear the antitrust litigation. Then, MasterCard tried to have the lead attorney and law firm disqualified, then their competitor, Discover Card announced a settlement.
Seemingly, each day brings more news that cripples their former reign of illegal price-fixing. What seemed like twice each year, Visa and MasterCard's board met to set prices by agreement. But lately they caught on that their customers will not tolerate any more increases. With their two core customers (merchants and consumers) engaged in a ocean-sized war against unbridled interchange charges, the news is grim and we are here with daily updates and commentary to keep you updated.
[source: WayTooHigh.com]
Discover Card Drops No Surcharge Rule, and is Dropped from Merchant Class Suit (PrimeZone)
NEW YORK, Feb. 13, 2006 -- Counsel for a group of merchants that has sued all the major credit card companies for antitrust violations today announced that, following negotiations, Discover has agreed to drop its "No Surcharge Rule" and, consequently, that Discover would be dropped from the antitrust class action, which is pending in a Brooklyn federal court before District Judge John Gleeson.
Click here for more info.
[source: Reinhardt Wendorf & Blanchfield]
Separately, Reuters reported Discover President Roger Hochschild said in an interview Monday the unit expects to gain market share by offering lower fees to merchants and by not setting minimum payment amounts.
Click here for more info.
[source: Reinhardt Wendorf & Blanchfield]
Separately, Reuters reported Discover President Roger Hochschild said in an interview Monday the unit expects to gain market share by offering lower fees to merchants and by not setting minimum payment amounts.
U.S. Congress Interchange Hearing, Wednesday, Feb 15, 2006 (WayTooHigh.com)
The Law and Economics of Interchange Fees. Hearing by the Subcommittee on Commerce, Trade, and Consumer Protection. Wednesday, February 15, 2006, 10:00 AM, 2123 Rayburn House Office Building. The Committee on Energy and Commerce is chaired by U.S. Congressman, Joe Barton.
For background, Click here to read the Sept 15th The Washington Post article: "Card Companies Are Filling Up At the Station." Which references, WayTooHigh.com and also profiles Rep. Joe Barton (R-Tex.) who remarked that "the percentage fee system -- giving the bank more money just because a consumer bought more gas -- "doesn't make a whole lot of sense to me."
WayTooHigh.com - The Credit Card Interchange Report explained that there is no incremental benefit from consumers to pay more as gas prices doubled. This is a similar pricing model to realtors who were comfortable charging 6% commissions. But, even they made adjustments as housing prices doubled and tripled in some regions. Deals and fee discounts from brokers became commonplace. But, for the banks, and Visa and MasterCard, they seemed greedier and more focused on piling up windfall profiteering that even Exxon Mobil pointed fingers at in full page advertisements. Instead, Visa and MasterCard should have been helping motorists during this national energy crisis. WayTooHigh.com contacted both Visa and MasterCard's CEO's to request that interchange fees at service stations rescinded during this crisis.
[source: WayTooHigh.com]
For background, Click here to read the Sept 15th The Washington Post article: "Card Companies Are Filling Up At the Station." Which references, WayTooHigh.com and also profiles Rep. Joe Barton (R-Tex.) who remarked that "the percentage fee system -- giving the bank more money just because a consumer bought more gas -- "doesn't make a whole lot of sense to me."
WayTooHigh.com - The Credit Card Interchange Report explained that there is no incremental benefit from consumers to pay more as gas prices doubled. This is a similar pricing model to realtors who were comfortable charging 6% commissions. But, even they made adjustments as housing prices doubled and tripled in some regions. Deals and fee discounts from brokers became commonplace. But, for the banks, and Visa and MasterCard, they seemed greedier and more focused on piling up windfall profiteering that even Exxon Mobil pointed fingers at in full page advertisements. Instead, Visa and MasterCard should have been helping motorists during this national energy crisis. WayTooHigh.com contacted both Visa and MasterCard's CEO's to request that interchange fees at service stations rescinded during this crisis.
[source: WayTooHigh.com]
Friday, February 10, 2006
Congressional Scrutiny (The Green Sheet, Inc.)
[WayTooHigh.com, editorial note: As gas prices double, so too must the bank profits from credit and debit card interchange fees, and then some, because consumers are more likely to charge when the cost to fill-up rises]
Interchange has been a contentious issue in the United States for more than a decade. But the issue has only recently captured the attention of lawmakers who are now debating interchange in the context of rising oil prices and price gouging accusations.
Energy legislation approved by the U.S. House and now awaiting consideration in the Senate, among other things would commission a Federal Trade Commission (FTC) study of price gouging at the gas pump, including an "analysis of the role and overall cost of credit card interchange rates on gasoline and diesel fuel retail prices."
The request was inserted in legislation taken up in the wake of Hurricane Katrina and the problems that ensued with domestic oil supplies. It was brought to the attention of Congress by the National Association of Convenience Stores (NACS), a Washington-area association that lobbies on behalf of convenience stores and service stations. NACS also is a party to current class-action litigation challenging Visa, MasterCard and several large banks on interchange pricing.
Congress, as a rule, doesn't meddle in things like bank pricing, unless, of course, there's a hue and cry from the public. Back in the early 1990s, with interest rates spiraling and bank credit card profits soaring, a debate occurred in Congress on legislation that addressed card fees, but no legislative mandates were issued.
That the current debate is being raised in the context of spiraling prices at the gas pump and allegations of price gouging by oil companies, however, and the fact that this is an election year, suggests that the pending request for an FTC study of credit card interchange might well be enacted.
It's only a preliminary step, of course, but the fact that the FTC might be called upon to look into credit card interchange suggests that the debate over card interchange won't be limited for much longer to the courts and convention panels.
[source: The Green Sheet, Inc., by Patti Murphy]
Interchange has been a contentious issue in the United States for more than a decade. But the issue has only recently captured the attention of lawmakers who are now debating interchange in the context of rising oil prices and price gouging accusations.
Energy legislation approved by the U.S. House and now awaiting consideration in the Senate, among other things would commission a Federal Trade Commission (FTC) study of price gouging at the gas pump, including an "analysis of the role and overall cost of credit card interchange rates on gasoline and diesel fuel retail prices."
The request was inserted in legislation taken up in the wake of Hurricane Katrina and the problems that ensued with domestic oil supplies. It was brought to the attention of Congress by the National Association of Convenience Stores (NACS), a Washington-area association that lobbies on behalf of convenience stores and service stations. NACS also is a party to current class-action litigation challenging Visa, MasterCard and several large banks on interchange pricing.
Congress, as a rule, doesn't meddle in things like bank pricing, unless, of course, there's a hue and cry from the public. Back in the early 1990s, with interest rates spiraling and bank credit card profits soaring, a debate occurred in Congress on legislation that addressed card fees, but no legislative mandates were issued.
That the current debate is being raised in the context of spiraling prices at the gas pump and allegations of price gouging by oil companies, however, and the fact that this is an election year, suggests that the pending request for an FTC study of credit card interchange might well be enacted.
It's only a preliminary step, of course, but the fact that the FTC might be called upon to look into credit card interchange suggests that the debate over card interchange won't be limited for much longer to the courts and convention panels.
[source: The Green Sheet, Inc., by Patti Murphy]
Thursday, February 09, 2006
Interchange Fee Disparity Causes Visa to Sweat at the Olympics (WayTooHigh.com)
The XX Olympic Games in Torino, Italy is literally heating up. The warm, sixty-degree weather is melting the otherwise festive tone to the Games. But, Visa International, which is a global Olympic partner must also be feeling a different type of heat from angry merchants throughout the United States. One Visa U.S.A. Olympic TV spot asks, "What are you waiting for?" We ask them the very same question.
The Games are drawing all types of attention to the Italian nation, including an unanswered request to the world's leading credit card association about why the merchant interchange fee in Italy is nearly half the rate in the United States?
[Source: WayTooHigh.com]
American Bar Association
The American Bar Association has a useful directory with links to several of the key organizations related to financial services antitrust law. WayTooHigh.com - The Credit Card Interchange Report is the first link referenced
[source: WayTooHigh.com]
[source: WayTooHigh.com]
MasterCard Likely to Postpone IPO Until 2nd Quarter
Although an earlier Businessweek article described that the planned MasterCard International Inc. IPO may occur in the first quarter of 2006, the Wall Street Journal is reporting a possible new date might be anywhere through June, 2006. The article also indicated that "people familiar with the matter" are suggesting the delay is not connected with the merchant antitrust class action litigation. A MasterCard spokesperson also explained that they are unable to comment on the IPO due to SEC regulations.
[source: WayTooHigh.com]
[source: WayTooHigh.com]
BREAKING NEWS....... MasterCard May Delay IPO (WSJ & Reuters)
Not to say we told you so first, and frequently, but....
WayTooHigh.com - The Credit Card Interchange Report, has been expounding for months about the reasons why MasterCard International's planned initial public offering might not materialize.
We were expecting that the financing would first be delayed and then cancelled. After all, how can the bank-owned card association make a compelling argument for investors to risk facing such enormous, potential exposure? From our prospective, the IPO was a mechanism for the banks to flick off their liabilities onto the public. From today's news accounts, the first part of our long-held assessment has apparently occurred.
Initially, the second largest credit card association was preparing to raise nearly $2.5 billion dollars during a 1st quarter planned IPO. Several previous WayTooHigh.com commentaries explained why this financing scheme might be extinguished.
Remember, MasterCard was planning to use upwards of $650 million from the proceeds to battle 30 Minute Photos Etc and the other plaintiffs lined up for this interchange war. We regularly opined that the MasterCard IPO structure would have burdened not the banks, but the shareholders with the nearly imminent legal antitrust liabilities.
[source: WayTooHigh.com]
WayTooHigh.com - The Credit Card Interchange Report, has been expounding for months about the reasons why MasterCard International's planned initial public offering might not materialize.
We were expecting that the financing would first be delayed and then cancelled. After all, how can the bank-owned card association make a compelling argument for investors to risk facing such enormous, potential exposure? From our prospective, the IPO was a mechanism for the banks to flick off their liabilities onto the public. From today's news accounts, the first part of our long-held assessment has apparently occurred.
Initially, the second largest credit card association was preparing to raise nearly $2.5 billion dollars during a 1st quarter planned IPO. Several previous WayTooHigh.com commentaries explained why this financing scheme might be extinguished.
Remember, MasterCard was planning to use upwards of $650 million from the proceeds to battle 30 Minute Photos Etc and the other plaintiffs lined up for this interchange war. We regularly opined that the MasterCard IPO structure would have burdened not the banks, but the shareholders with the nearly imminent legal antitrust liabilities.
[source: WayTooHigh.com]
Wednesday, February 08, 2006
It might be a cold winter for Visa in Torino, Italy (WayTooHigh.com)
[Reposted 2-8-06]
To better alert and educate all consumers and retailers about the $25-billion annual hidden tax paid to banks for their collusive, price-fixing charge card fees WayTooHigh.com reports on plans to use Euros rather than Visa cards during the winter Games in Italy.
While staunch advocates for supporting the Olympics (R) and its official partners, as co-editors of WayTooHigh.com we have received suggestions from consumers to encourage using cash as much as possible during the Olympics (R). The recommendations from several calls we received was to continue drawings attention to the banks interchange fees.
Since the mid-1990s, the co-editors of WayTooHigh have regularly attended the Games, advocated for supporting the official sponsors and even created a program called "Support The Games" to encourage people to attend the Olympics (R) in Athens.
The worldwide Olympic (R) partners play a key role in subsidizing the Games which unites the entire world together and symbolizes one of the most endearing traditions.
As you might know, Visa is again a worldwide Olympic (R) partner. While we applaud their outstanding commitment to the Games, the banks which own this credit card association are also defendants in a multi-billion dollar antitrust litigation which might achieve class-action status even before the competition begins next February.
The battle waged against the banks by consumers and merchants is so important that we are hearing consumer sentiment to make another statement by using cash as much as possible when attending 2006 winter games in Italy.
Expect Visa to again launch its mighty public relations machine to explain the value of using charge and debit cards rather than Euros during the winter games. But, don't hold your breath in having them explain its policy on foreign transaction card fees or why the merchant interchange fee in Italy is less than half the rate in the United States. And, it is a good thing that these weren't the Montreal Summer Games, because in Canada the interchange fee for debit cards is .... Zero.
[source: WayTooHigh.com]
To better alert and educate all consumers and retailers about the $25-billion annual hidden tax paid to banks for their collusive, price-fixing charge card fees WayTooHigh.com reports on plans to use Euros rather than Visa cards during the winter Games in Italy.
While staunch advocates for supporting the Olympics (R) and its official partners, as co-editors of WayTooHigh.com we have received suggestions from consumers to encourage using cash as much as possible during the Olympics (R). The recommendations from several calls we received was to continue drawings attention to the banks interchange fees.
Since the mid-1990s, the co-editors of WayTooHigh have regularly attended the Games, advocated for supporting the official sponsors and even created a program called "Support The Games" to encourage people to attend the Olympics (R) in Athens.
The worldwide Olympic (R) partners play a key role in subsidizing the Games which unites the entire world together and symbolizes one of the most endearing traditions.
As you might know, Visa is again a worldwide Olympic (R) partner. While we applaud their outstanding commitment to the Games, the banks which own this credit card association are also defendants in a multi-billion dollar antitrust litigation which might achieve class-action status even before the competition begins next February.
The battle waged against the banks by consumers and merchants is so important that we are hearing consumer sentiment to make another statement by using cash as much as possible when attending 2006 winter games in Italy.
Expect Visa to again launch its mighty public relations machine to explain the value of using charge and debit cards rather than Euros during the winter games. But, don't hold your breath in having them explain its policy on foreign transaction card fees or why the merchant interchange fee in Italy is less than half the rate in the United States. And, it is a good thing that these weren't the Montreal Summer Games, because in Canada the interchange fee for debit cards is .... Zero.
[source: WayTooHigh.com]
Tuesday, February 07, 2006
Citi and MasterCard Run PayPass Trial on NY Subway
As contactless payment solutions become more prevalent, especially for transactions under a dollar, the question is what is the interchange fee?
In this case, what will Citi Group and MasterCard be charging New York's Metropolitan Transportation Authority?
WayTooHigh.com has long held that technology should force transactions to be quicker and less expensive. If that is the case, why are the other nearly one-hundred merchant interchange fees in the United States at levels higher than most other industrialized nations?
While this contactless payment technology is innovative and clearly represents a booming new opportunity, what is missing from all the press hype is what is the cost to the merchant. When contactless payment occurs at McDonald's for a small bag of fries, does that mean the fast food giant turns over much of the sale to the bank for interchange fees? Sure, it's convenient, but for the consumer or for the banks' earnings?
[source: WayTooHigh.com]
In this case, what will Citi Group and MasterCard be charging New York's Metropolitan Transportation Authority?
WayTooHigh.com has long held that technology should force transactions to be quicker and less expensive. If that is the case, why are the other nearly one-hundred merchant interchange fees in the United States at levels higher than most other industrialized nations?
While this contactless payment technology is innovative and clearly represents a booming new opportunity, what is missing from all the press hype is what is the cost to the merchant. When contactless payment occurs at McDonald's for a small bag of fries, does that mean the fast food giant turns over much of the sale to the bank for interchange fees? Sure, it's convenient, but for the consumer or for the banks' earnings?
[source: WayTooHigh.com]
Friday, February 03, 2006
Interchange Fees Help Fuel MasterCard International® Double Digit Growth in 2005
[source: MasterCard International Online Press Release]
MasterCard International® Reports Double Digit Growth in 2005 as Gross Dollar Volume Increases 11.9% Worldwide
Purchase, NY, February 02, 2006 - MasterCard International today announced operating results for the fourth quarter and full-year 2005, with double-digit growth in both gross dollar volume (GDV) and purchase volume. In 2005, cardholders worldwide used 749.3 million MasterCard-branded cards for more than 19.1 billion transactions, generating gross dollar volume (GDV) of $1.7 trillion, an increase of 11.9 percent over 2004.
“Innovations like our PayPass contactless payments technology, combined with the global strength of our brand and ability to provide our customers with leading-edge processing services and industry expertise continue to resonate around the world,” said MasterCard Chief Operating Officer Alan Heuer. MasterCard's strong performance in 2005 was fueled by growth in both credit and debit programs. GDV for worldwide credit and charge programs grew 9.2 percent to more than $1.3 trillion, while GDV for offline debit programs rose 23.6 percent to $347.3 billion.
MasterCard International® Reports Double Digit Growth in 2005 as Gross Dollar Volume Increases 11.9% Worldwide
Purchase, NY, February 02, 2006 - MasterCard International today announced operating results for the fourth quarter and full-year 2005, with double-digit growth in both gross dollar volume (GDV) and purchase volume. In 2005, cardholders worldwide used 749.3 million MasterCard-branded cards for more than 19.1 billion transactions, generating gross dollar volume (GDV) of $1.7 trillion, an increase of 11.9 percent over 2004.
“Innovations like our PayPass contactless payments technology, combined with the global strength of our brand and ability to provide our customers with leading-edge processing services and industry expertise continue to resonate around the world,” said MasterCard Chief Operating Officer Alan Heuer. MasterCard's strong performance in 2005 was fueled by growth in both credit and debit programs. GDV for worldwide credit and charge programs grew 9.2 percent to more than $1.3 trillion, while GDV for offline debit programs rose 23.6 percent to $347.3 billion.
'Debit-Card Fees Mask Bank-Sponsored Scheme,' Warns WayTooHigh.com -- The Credit Card Interchange Report
(Click here to view news release)
Hidden interchange fees on debit-cards impact retailers and consumers
Irvine, CA (February 3, 2006) -- While debit-cards instantly deduct funds from a consumer’s bank accounts, retailers face predatory schemes by Visa and MasterCard which charge merchant interchange fees well above competitive levels. Even though the transaction fees are nearly ten-times less for debit cards, where customers enter their PIN (personal identification number), the banks are using their market power to force retailers to unwittingly accept those higher-cost, signature-verified debit cards.
Most retailers, especially small businesses are unaware of steep costs when accepting some debit-cards. On occasion, the assumed flat rate interchange fee of $0.50 - $0.75 cents may be riddled with substantially higher, electronically substituted costs. Instead, merchants might be forced to pay a percent of the sale -- averaging 1.70% in the U.S. or higher, based on a myriad of conditions. "This $25 billion annual interchange cost is not just a hidden tax on consumers, but also on merchants who often have no clue what they were charged.
This well-protected scheme by Visa and MasterCard even redirects debit-card fees to supracompetitive levels," explained Mitch Goldstone.
As lead plaintiff and class-representative, Goldstone, along with Carl Berman, also co-edit WayTooHigh.com -- The Credit Card Interchange Report [http://www.WayTooHigh.com which provides international daily updates on the antitrust litigation alleging that Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, J.P. Morgan, Chase, Fleet Bank, Capital One, and other banks engage in illegal, collusive practices by setting interchange fees. A recent article from WayTooHigh.com -- The Credit Card Interchange Report noted the "Payment of Choice" slogan seems to benefit Visa and MasterCard rather than merchants and consumers.
As a retail and Ecommerce merchant, Goldstone explained "when consumers present his company with Visa or MasterCard-branded debit-cards, and when the transaction is processed for PIN authorization, it might not be completed. However, if merchants swipe the debit-card through their electronic terminals, the transaction will be successfully completed at credit-card rates. The reason: debit-card issuing banks may impose a daily limit on some PIN-based transactions, even if the bank balance is greater than the limit." While banks promote debit-cards as a smart way to budget money -- you cannot spend what you do not have -- the benefactor seems to be Visa and MasterCard.
Here is why:
1) To personalize what he calls "a bank-sponsored scheme," Goldstone profiled a customer experience who used their debit-card at his Irvine, CA-based company, 30 Minute Photos Etc. The nearly $400 customer transaction was declined due to a daily $300 card limit; however, the issuing bank explained that funds were available. For larger transactions, the banks' market power may require non-debit card processing. In the above case, the bank representative requested that the card be transacted as a Visa charge-card. It was then successfully processed with funds instantly deducted from the customer’s bank account. Also, rather than paying a merchant interchange fee of under a dollar, the merchant charge was nearly ten-dollars -- even though processing the transaction as a debit-card with PIN-based authorization was more secure.
2) Another recent example involved a rechargeable MasterCard debit-card. The customer did not know their PIN number and explained that none was provided. Therefore, rather than a flat interchange fee, 30 Minute Photos Etc. was forced to swipe the card as a charge card and although the full amount was instantly deducted from the cards pre-paid value, the merchant interchange fee was charged at the higher percent-of-sale rate.
These incidents mark just one of the more than two-hundred separate commentary and news postings available at WayTooHigh.com - The Credit Card Interchange Report. Narratives on Visa and MasterCard’s unbridled greed are updated daily.
As well-known entrepreneurs and leaders in this battle - joined by millions of businesses and consumers against the banks - Goldstone and Berman are intent to educate merchants and consumers about these hundreds-of-billions of dollars in what they claim are generated from illegal price-fixing. Goldstone explained that "Visa and MasterCard remain nearly silent on the interchange wars even though it is shaping up as the most consequential and economically important financial news story of 2006.
MasterCard's general counsel, Noah J. Hanft, remains cloaked deep within corporate walls cemented shut from the realities of honest facts. My opinion is that Mr. Hanft is the one who is misguided, protecting an illegal fiefdom and being paid by financial institutions which are not `pro' but, anti-competitive."
Even in Torino, Italy -- home to the Winter Olympics -- the average merchant interchange fee is just 0.70%, while the rate in Los Angeles, CA is 1.70 percent.
# # #
30 Minute Photos Etc., founded in 1990, is regularly featured by the national media. The company operates a retail photo center, based in Irvine, CA, 30minphotos.com and ShoeboxReprints.com, a national online boutique photo service. Company president, Mitch Goldstone will address the International Photo Marketing Association's national convention in February. In addition to co-editing WayTooHigh.com -- The Credit Card Interchange Report, Goldstone and partner, Carl Berman are also class representatives and lead plaintiff in the multi-billion dollar antitrust litigation against Visa, MasterCard, Bank of America, Citigroup, JP Morgan Chase, Wachovia, Wells Fargo and other major banks for alleged credit card merchant interchange price-fixing. More info available at: WayTooHigh.com -- The Credit Card Interchange Report.
[source: WayTooHigh.com]
Hidden interchange fees on debit-cards impact retailers and consumers
Irvine, CA (February 3, 2006) -- While debit-cards instantly deduct funds from a consumer’s bank accounts, retailers face predatory schemes by Visa and MasterCard which charge merchant interchange fees well above competitive levels. Even though the transaction fees are nearly ten-times less for debit cards, where customers enter their PIN (personal identification number), the banks are using their market power to force retailers to unwittingly accept those higher-cost, signature-verified debit cards.
Most retailers, especially small businesses are unaware of steep costs when accepting some debit-cards. On occasion, the assumed flat rate interchange fee of $0.50 - $0.75 cents may be riddled with substantially higher, electronically substituted costs. Instead, merchants might be forced to pay a percent of the sale -- averaging 1.70% in the U.S. or higher, based on a myriad of conditions. "This $25 billion annual interchange cost is not just a hidden tax on consumers, but also on merchants who often have no clue what they were charged.
This well-protected scheme by Visa and MasterCard even redirects debit-card fees to supracompetitive levels," explained Mitch Goldstone.
As lead plaintiff and class-representative, Goldstone, along with Carl Berman, also co-edit WayTooHigh.com -- The Credit Card Interchange Report [http://www.WayTooHigh.com which provides international daily updates on the antitrust litigation alleging that Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, J.P. Morgan, Chase, Fleet Bank, Capital One, and other banks engage in illegal, collusive practices by setting interchange fees. A recent article from WayTooHigh.com -- The Credit Card Interchange Report noted the "Payment of Choice" slogan seems to benefit Visa and MasterCard rather than merchants and consumers.
As a retail and Ecommerce merchant, Goldstone explained "when consumers present his company with Visa or MasterCard-branded debit-cards, and when the transaction is processed for PIN authorization, it might not be completed. However, if merchants swipe the debit-card through their electronic terminals, the transaction will be successfully completed at credit-card rates. The reason: debit-card issuing banks may impose a daily limit on some PIN-based transactions, even if the bank balance is greater than the limit." While banks promote debit-cards as a smart way to budget money -- you cannot spend what you do not have -- the benefactor seems to be Visa and MasterCard.
Here is why:
1) To personalize what he calls "a bank-sponsored scheme," Goldstone profiled a customer experience who used their debit-card at his Irvine, CA-based company, 30 Minute Photos Etc. The nearly $400 customer transaction was declined due to a daily $300 card limit; however, the issuing bank explained that funds were available. For larger transactions, the banks' market power may require non-debit card processing. In the above case, the bank representative requested that the card be transacted as a Visa charge-card. It was then successfully processed with funds instantly deducted from the customer’s bank account. Also, rather than paying a merchant interchange fee of under a dollar, the merchant charge was nearly ten-dollars -- even though processing the transaction as a debit-card with PIN-based authorization was more secure.
2) Another recent example involved a rechargeable MasterCard debit-card. The customer did not know their PIN number and explained that none was provided. Therefore, rather than a flat interchange fee, 30 Minute Photos Etc. was forced to swipe the card as a charge card and although the full amount was instantly deducted from the cards pre-paid value, the merchant interchange fee was charged at the higher percent-of-sale rate.
These incidents mark just one of the more than two-hundred separate commentary and news postings available at WayTooHigh.com - The Credit Card Interchange Report. Narratives on Visa and MasterCard’s unbridled greed are updated daily.
As well-known entrepreneurs and leaders in this battle - joined by millions of businesses and consumers against the banks - Goldstone and Berman are intent to educate merchants and consumers about these hundreds-of-billions of dollars in what they claim are generated from illegal price-fixing. Goldstone explained that "Visa and MasterCard remain nearly silent on the interchange wars even though it is shaping up as the most consequential and economically important financial news story of 2006.
MasterCard's general counsel, Noah J. Hanft, remains cloaked deep within corporate walls cemented shut from the realities of honest facts. My opinion is that Mr. Hanft is the one who is misguided, protecting an illegal fiefdom and being paid by financial institutions which are not `pro' but, anti-competitive."
Even in Torino, Italy -- home to the Winter Olympics -- the average merchant interchange fee is just 0.70%, while the rate in Los Angeles, CA is 1.70 percent.
# # #
30 Minute Photos Etc., founded in 1990, is regularly featured by the national media. The company operates a retail photo center, based in Irvine, CA, 30minphotos.com and ShoeboxReprints.com, a national online boutique photo service. Company president, Mitch Goldstone will address the International Photo Marketing Association's national convention in February. In addition to co-editing WayTooHigh.com -- The Credit Card Interchange Report, Goldstone and partner, Carl Berman are also class representatives and lead plaintiff in the multi-billion dollar antitrust litigation against Visa, MasterCard, Bank of America, Citigroup, JP Morgan Chase, Wachovia, Wells Fargo and other major banks for alleged credit card merchant interchange price-fixing. More info available at: WayTooHigh.com -- The Credit Card Interchange Report.
[source: WayTooHigh.com]
Thursday, February 02, 2006
Justice Department Wants in on Debit Card Settlement (NRF / WSJ)
The federal government is asking for a piece of the $3 billion settlement agreed to by Visa USA and MasterCard International over debit card fees. The Justice Department submitted a claim valued at approximately $100 million, joining thousands of other retailers seeking damages.
Reuter's reports that retailers are questioning the Judge as to whether the U.S. Government is entitled to any part of this prior settlement.
[source: Wall Street Journal, subscription required]
Reuter's reports that retailers are questioning the Judge as to whether the U.S. Government is entitled to any part of this prior settlement.
[source: Wall Street Journal, subscription required]
UK's Office of Fair Trade Launches New Investigation in Credit Card Charges (The Daily Telegraph)
The UK's Office of Fair Trading has launched a new investigation into MasterCard as it "has reasonable grounds for suspecting" that the way transaction fees are set may break competition rules.
WayTooHigh.com - The Credit Card Interchange Report, which began chronicaling interchange issues nearly one-year ago has always called the fees a hidden tax on consumers. Now, from overseas, England is following this theme. Reuter's reports that the OFT said "the interchange fees, which retailers pass on to shoppers by raising prices, were excessive, and likened them to a tax on consumers."
MasterCard is again in the spotlight.
The OFT's decision and a companion paper are available on its website.
[source: The Daily Telegraph, Reuters]
WayTooHigh.com - The Credit Card Interchange Report, which began chronicaling interchange issues nearly one-year ago has always called the fees a hidden tax on consumers. Now, from overseas, England is following this theme. Reuter's reports that the OFT said "the interchange fees, which retailers pass on to shoppers by raising prices, were excessive, and likened them to a tax on consumers."
MasterCard is again in the spotlight.
The OFT's decision and a companion paper are available on its website.
[source: The Daily Telegraph, Reuters]
Wednesday, February 01, 2006
“Payment of Choice” Slogan Seems to Benefit Visa® and MasterCard®, not Merchants or Consumers (WayTooHigh.com)
We already know that Washington lobbyist, Susan Molinari and the group she leads, Americans for Consumer Education and Competition® "enjoys the financial support of Visa USA."
She also broadcasts that debit cards are a "wise budgeting tool" and the"payment of choice". Well, that may be so for the banks but seemingly not for merchants or consumers. The former U.S. Congressperson and former TV broadcaster issued press releases, including one explaining that an overwhelming majority of consumers believe imposing check out fees on those who pay with plastic is an unfair practice.
We agree. But, at the expense of consumers and merchants. Cardholders who pay with cash or checks are subsidizing the costs incurred by merchants from those using debit and credit cards.
As a retail and ecommerce merchant, we too noticed that when consumers present a Visa or MasterCard®-branded debit card and when the transaction is processed for PIN authorization the transaction might not be completed. Whereas, if the merchant swipes the debit card through the electronic terminal, the transaction will be successfully completed. The reason: debit card issuing banks may impose a daily limit on some PIN-based transactions, even if the bank balance is greater than the limit - just like with ATM's. But, if the debit card is swiped as a signature transaction, the consumer has use of their full balance on deposit with the bank.
One example was a customer who last week presented 30 Minute Photos Etc.® with their debit card for a transaction of about four-hundred dollars. They used the PIN pad to enter their number. Seconds later, the terminal beeped with the message "Invalid Transaction". The customer was confused and embarrassed because they knew there was more in their account than the total for this transaction. We tried the transaction again with the same result. The customer then called their issuing bank. Customer service explained they indeed had enough funds but that there was a three-hundred dollar limit on their debit card. Funny, we don't remember Susan Molinari telling us about this limit?
While Ms. Molinari and other advocacy groups paid by the banks promote debit cards, the result for larger transactions is that the banks' market power may require non-debit card processing. In the above case, the bank representative requested that the card be transacted as a Visa card and it was processed. However, the customer was still confused. Because of our national leadership in this interchange war, that customer was familiar with the issues and asked why processing the transaction in a less secure way (signature card ) rather than the more protected PIN entry method costs merchants (and therefore the consumers too) more money?
Answer: The banks earn more money from signature-based than PIN-based transactions. On this single four-hundred dollar transaction the PIN (more secure) debit card transaction would cost the merchant less than one-dollar in interchange fees. However, for the signature-based transactions we were charged nearly ten-dollars.
While publicly silent, the banks are beginning to take notice of this merchant and consumer revolt and interchant war. Seemingly, twice a year the bank-owned credit card associations raised rates; but recently this trend was paused as they are feeling the heat generated from their unbridled greed.
However, MasterCard's® general counsel, Noah J. Hanft, remains cloaked deep within corporate walls cemented shut from the realities of honest facts. Our opinion is that Mr. Hanft is the one who is misguided, protecting an illegal fiefdom and being paid by financial institutions which are not "pro" but, anti-competitive.
So, whose "payment of choice" is it?
[source: WayTooHigh.com]
She also broadcasts that debit cards are a "wise budgeting tool" and the"payment of choice". Well, that may be so for the banks but seemingly not for merchants or consumers. The former U.S. Congressperson and former TV broadcaster issued press releases, including one explaining that an overwhelming majority of consumers believe imposing check out fees on those who pay with plastic is an unfair practice.
We agree. But, at the expense of consumers and merchants. Cardholders who pay with cash or checks are subsidizing the costs incurred by merchants from those using debit and credit cards.
As a retail and ecommerce merchant, we too noticed that when consumers present a Visa or MasterCard®-branded debit card and when the transaction is processed for PIN authorization the transaction might not be completed. Whereas, if the merchant swipes the debit card through the electronic terminal, the transaction will be successfully completed. The reason: debit card issuing banks may impose a daily limit on some PIN-based transactions, even if the bank balance is greater than the limit - just like with ATM's. But, if the debit card is swiped as a signature transaction, the consumer has use of their full balance on deposit with the bank.
One example was a customer who last week presented 30 Minute Photos Etc.® with their debit card for a transaction of about four-hundred dollars. They used the PIN pad to enter their number. Seconds later, the terminal beeped with the message "Invalid Transaction". The customer was confused and embarrassed because they knew there was more in their account than the total for this transaction. We tried the transaction again with the same result. The customer then called their issuing bank. Customer service explained they indeed had enough funds but that there was a three-hundred dollar limit on their debit card. Funny, we don't remember Susan Molinari telling us about this limit?
While Ms. Molinari and other advocacy groups paid by the banks promote debit cards, the result for larger transactions is that the banks' market power may require non-debit card processing. In the above case, the bank representative requested that the card be transacted as a Visa card and it was processed. However, the customer was still confused. Because of our national leadership in this interchange war, that customer was familiar with the issues and asked why processing the transaction in a less secure way (signature card ) rather than the more protected PIN entry method costs merchants (and therefore the consumers too) more money?
Answer: The banks earn more money from signature-based than PIN-based transactions. On this single four-hundred dollar transaction the PIN (more secure) debit card transaction would cost the merchant less than one-dollar in interchange fees. However, for the signature-based transactions we were charged nearly ten-dollars.
While publicly silent, the banks are beginning to take notice of this merchant and consumer revolt and interchant war. Seemingly, twice a year the bank-owned credit card associations raised rates; but recently this trend was paused as they are feeling the heat generated from their unbridled greed.
However, MasterCard's® general counsel, Noah J. Hanft, remains cloaked deep within corporate walls cemented shut from the realities of honest facts. Our opinion is that Mr. Hanft is the one who is misguided, protecting an illegal fiefdom and being paid by financial institutions which are not "pro" but, anti-competitive.
So, whose "payment of choice" is it?
[source: WayTooHigh.com]
Retailers' Pain at the Pump (NACS)
Convenience store retailers dislike higher gasoline prices as much as their customers do, as margins decrease while costs – particularly credit card fees – increase.
[source: National Association of Convenience Stores]
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