“Consumers Feel the Next Crisis: It’s Credit Cards” (via NY Times)

October 29, 2008

Some reward programs have also gotten stingier as lenders cut corners to save money. Card companies, for example, have taken to substituting cheaper brands for a Sony big-screen television as a way of lowering the cost of their redemption prizes.

For less creditworthy customers, issuers are pulling back on promotional offers that allowed borrowers to pay no interest for months as they try to get ahead of stiffer lending rules that have been proposed by federal banking regulators and Congress.

The regulations, while beneficial to consumers, will curb profits on card issuers’ riskiest customers. JPMorgan said that it was withdrawing some teaser-rate loans that were only marginally profitable. Discover Financial shortened the duration of its zero-balance offers.

Read more.

[source: NY Times]

MasterCard: The Most Absurd Statement in the History of the Credit Card Industry

October 27, 2008

Visa, MasterCard to pay $2.75 billion to Discover in antitrust settlement

Visa Inc. and MasterCard Inc. separately disclosed Monday a total of $2.75 billion in settlements to resolve antitrust claims filed by industry rival Discover Financial Services Inc.

From today’s MasterCard press release

“We believe Discovers lack of success resulted from decisions that created a business model that is not attractive to bank issuers. Nonetheless, we chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial. This result, which is in no way an admission of liability, is in the best interest of our shareholders, our customers and our company,” said MasterCard General Counsel Noah J. Hanft. “We will continue to focus on out-competing Discover in the marketplace, where real-world performance is what counts.”

Either MasterCard’s General Council is so distant from reality, or he is…. 

As a lead plaintiff suing his company, I will reserve my disdain and further characterisation of his comments.  However, as an entrepreneur who owns one of the millions of companies which are forced to pay their and Visa Inc’s unfair merchant discount fees, this is outrageous. MasterCard is paying nearly a billion dollars to Discover Financial Services, yet they are taking no responsibility?  Really, now?

If I was a MasterCard shareholder, I would want to know why they are writing this check if they claim because it is just a distraction?   When in the history of commerce have you ever heard of a multinational conglomerate sending this type of message?  I just hope the Federal bailout of the financial system isn’t backing the payment from the banks, which own nearly half of MasterCard

Fortunately, they still stand accused of the nation’s largest antitrust litigation and for me, personally, I will not let them off the hook.  I want a jury to hear the whole story.  If you ever watch the film Erin Brockovich, this litigation is sure to garner exponentially more passion and emotion.  Discover should have demanded MasterCard not only write the check, but apologize for their discretion.  Mr. Hanft and the entire MasterCard legal team are a disgrace. 

 Could you ever imagine any-sized company writing this type of check if they were not guilty?  The member banks and MasterCard are an embarrassment.  Can’t the banks do anything right?  Along with Visa International, which collectively control a giant 80% market share of the electronic payment network, both wield extraordinary power through their collusive anti-competitive price fixing.

Just how vast is Visa and MasterCard’s cash-cow cartel?  Do you know of any other business which can pay out billions followed by its stock rising?  Visa of San Francisco will pay $1.89 billion, and MasterCard of Purchase, N.Y., will pay $862.5 million.  Previously, Visa settled with American Express for a similar suit for about $2.25 billion, MasterCard agreed to pay AmEx in June $1.8 billion.

“MasterCard Settles Litigation with Discover Financial Services; Will Take a Third Quarter Net After-Tax Charge of $515.5 Million” (via PRNewswire)

October 27, 2008
PURCHASE, N.Y., Oct 27, 2008 /PRNewswire via COMTEX/ — MasterCard Incorporated today announced that final agreement has been reached to settle outstanding litigation brought against MasterCard and Visa by Discover Financial Services. As a result, MasterCard will take a net after-tax charge of $515.5 million in the third quarter of 2008.
MasterCard will pay $862.5 million of the total $2.75 billion settlement reflecting the terms of a judgment-sharing agreement with Visa that was finalized in July, 2008. In addition, in connection with the settlement, Morgan Stanley, Discover’s former parent company, agreed to pay MasterCard $35 million, resulting in a net settlement of $827.5 million. MasterCard will make its payment to Discover and receive the payment from Morgan Stanley in November.
“We believe Discover’s lack of success resulted from decisions that created a business model that is not attractive to bank issuers. Nonetheless, we chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial. This result, which is in no way an admission of liability, is in the best interest of our shareholders, our customers and our company,” said MasterCard General Counsel Noah J. Hanft. “We will continue to focus on out-competing Discover in the marketplace, where real-world performance is what counts.”
About MasterCard Incorporated
MasterCard Incorporated advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchant worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com.
[source: PRNewswire]

“‘Simultaneous’ rise in credit card fees galls merchants” (via Ottawa Business Journal)

October 20, 2008

Posted from an article in The Ottawa Business Journal – By Elizabeth Howell, Ottawa Business Journal Staff

Mon, Oct 20, 2008 12:00 AM EST

Local retailers call for regulation to halt shrinking bottom lines

A coalition of businesses fed up with rising credit card interchange fees has launched a complaint with the federal government’s independent Competition Bureau, said a representative from the Canadian Federation of Independent Business (CFIB).

Garth Whyte, executive vice-president of the Ottawa-based association, said Visa and MasterCard – who control 80 per cent of the Canada’s credit card market – sent out concurrent notices alerting merchants to fee hikes in June and then again this month.

“There’s been simultaneous increases in both Visa and MasterCard charges, (so) we lodged a formal complaint because Visa and MasterCard have a duopoly,” Mr. Whyte said.

“We think we should investigate whether these increases were an arrangement or were pure coincidence. But it’s happened again in October for both of them.”

The extent of the overall percentage rise in interchange fees – an unregulated cost paid by retailers every time a consumer uses a credit card in a store – is unclear due to the number of different types of credit cards affected, each with their own rates attached to them.

But the CFIB said its members have been paying far more to credit card companies than earlier this year – particularly for premium cards offering shopping rewards.

The Retail Council of Canada (RCC) has estimated the average interchange fee in Canada is two per cent. Australia, which regulates its fees, sits at 0.45 per cent. The U.S., which has a regulatory bill before Congress, is at 1.75 per cent.

As a result, some retailers have said they simply can’t stomach the increase – a single Quickie Convenience Stores outlet saw its fees jump from $60,000 last year to $98,000 this year, according to a company official.

Chris Wilcox, general manager of the Ottawa-based convenience store chain, speculated merchants may have to take the radical step of not accepting credit cards.

“That’s the only way we can have any action on this: to have a protest, stop accepting these cards, to get some attention. Whether or not that happens, we’ll see,” he said. “We’re concerned, and quite worried about this. Canada is one of the few countries in the world that doesn’t regulate this sort of stuff.”

Marilyne Nahum, an official at the Competition Bureau, said she was unable to discuss the grievance.

“We actually conduct our investigations in private, so I can’t confirm whether or not we received a complaint about the issue,” she said.

MasterCard refused comment except to point to an Oct. 1 press release on its website. “The RCC and CFIB are attempting a cash grab from consumers,” the statement read. “By attempting to make merchant fees an election issue, the RCC and the CFIB are essentially calling upon politicians to intervene in commercial matters between private-sector entities.”

“It is important to note that Visa Canada’s effective interchange rates have remained flat for 35 years,” read a similar statement from Visa, dated Oct. 6.

Indeed, faced with the ongoing credit crunch, credit card companies could have to increase fees simply to maintain profits – just like any other business, pointed out Elizabeth Evans, director of the Ted Rogers School of Retail Management at Ryerson University.

At the same time, she cautioned, retailers in Canada have to be competitive with other countries. “Like many things in the Canadian business structure, our costs are higher than they are globally in many instances,” she said.

“This current economic crisis is bringing this home more than (anything else) possibly could. How we do our businesses here is not the only thing that influences our outcomes.”

RCC agreed merchants are facing “desperate times,” but added they aren’t in favour of a credit card strike. The council said it’s in discussions to persuade MPs to clamp down on fee hikes.

“The challenge is we have so many diverse retailers,” said Derek Nighbor, the council’s senior vice-president of national affairs.

“If a retailer is depending on the biggest chunk on their business from credit cards – as many are – it could be difficult financially for some merchants or retailers to (protest). . . The effectiveness of that kind of a campaign in other countries has not been successful because you need everyone to hang together.”

He added that premium cards can physically look the same but have different rates attached, all depending on the customer.

“This is a consumer issue,” he said. “This is affecting prices in Canada at a time when retailers are fighting to keep prices competitive.”

[source: Ottawa Business Journal]

StopStickingItToUs Coalition Backed by 120,000 Canadian Companies

October 19, 2008


 Click here to listen to the StopStickingItToUs radio ad running this week in several cities across Canada.

The StopStickingItToUs Coalition is a group of Canadian associations, led by Retail Council of Canada and backed by over 120,000 businesses from coast-to-coast, that is standing up to the Big Credit Card Companies to put a stop to skyrocketing fees. Join the fight and take action by writing your MP and sounding the alarm about these fees.

The coalition will also be actively involved in the proposed re-structuring of Interac. Interac, Canada’s efficient and cost-effectve debit system has applied to the Competition Bureau to re-structure and join the Big Credit Card companies in charging higher fees. Coalition members intend to act as interveners in the process and fight to keep Interac from moving ahead with this change as it will be detrimental to merchants and all Canadians.

StopStickingItToUs Coalition Members
Retail Council of Canada, Alberta Liquor Store Association, Canadian Booksellers Association, Canadian Convenience Stores Association, Canadian Council of Grocery Distributors, Canadian Federation of Independent Grocers,

Canadian Jewellers Association, Canadian Restaurant and Foodservices Association, Hotel Association of Canada, Ontario Accommodation Association, Ontario Restaurant Hotel and Motel Association, Retail B.C, The Canadian Independent Petroleum Marketers Association, The British Columbia Restaurant and Food Services Association, The Retail Merchant’s Association of Canada (Ontario). Wine Council of Ontario, Mega Group Inc. Bicycle Trade Association of Canada.
Do you know what you pay to Big Credit Card companies in hidden fees everytime you shop?
Canadian consumers paid over $4.5 billion in hidden credit card fees last year alone – fees we all pay at the checkout to cover the cost of lavish incentive programs and corporate credit card benefits, even if you don’t have one!

Now these companies want to raise these skyrocketing hidden fees. With their plan, you pay more, your local retailer pays more and the only ones getting rich are the Big Credit Card companies. If they get their way, seniors, students and low-income Canadians will spend even more subsidizing corporate airfare points and luxury discounts every time they shop.

Retailers are at the heart of every Canadian community. There are over 227,000 retail stores in Canada – roughly 1 in 10 businesses is a retail establishment – an 95% of all retail stores in Canada are small or independent. They provide jobs for over 2.1 million Canadians and support local charities, sporting and cultural events from coast to coast.

Local retailers and businesses are taking action to stand up for consumers and put an end to these skyrocketing hidden fees.

Big Credit Card companies need to stop sticking it to us!


Most small businesses couldn’t survive without accepting credit cards. But a new fee structure is making it difficult for merchants to predict what they’ll pay for the privilege.Read more

Re: Retail council is wrong, Sept. 29.Letter-writer Tony Maraschiello of MasterCard Canada suggests a disinformation campaign by retailers, but he doesn’t dispute that Visa and MasterCard control 80 per cent of the market in Canada and they are unregulated. These foreign-owned credit card companies collected more than $4.5 billion in interchange fees from Canadians last year.

Read more

Tony Maraschiello of MasterCard Canada accuses retailers of a “cash grab” simply because we are asking for some control of the credit card companies’ “cash cow.”He suggests a disinformation campaign by retailers, but he doesn’t dispute the facts: Visa and MasterCard control 80 per cent of the market in Canada and they are unregulated.

These foreign-owned credit card companies collected over $4.5 billion in interchange fees from Canadians last year.

Read more

EuroCommerce has today strongly warned against increases in payment Card Schemes fees being introduced from 1 October 2008. From this date, card scheme MasterCard intends to significantly increase its Card Schemes fees to merchant acquirers (and therefore ultimately on to the merchant) for both MasterCard credit and Maestro debit cards across Europe. In some markets, MasterCard have indicated that the domestic card scheme fee will increase by up to 161%.

Read more

The CEO of Fredericton’s Chamber of Commerce is adding his voice to leaders of other retail and business groups in condemning Visa and MasterCard for launching merchant fee hikes.

Read more

Federal Conservative candidate Keith Ashfield says he supports small-business owners in Fredericton who are upset about hikes to Visa and MasterCard merchant fees.Read more

The U.S. House of Representatives on Tuesday passed the Credit Cardholders’ Bill of Rights Act (H.R. 5244), legislation to rein in unfair and deceptive credit-card company practices, on a vote of 312 to 112, said the Merchants Payments Coalition (MPC), a group of retailers, including convenience stores and gas stations, fighting against unfair credit-card fees.

Read more

Credit card costs
Pat Foran of CTV Toronto on how the rising cost to retailers of accepting major credit cards could be passed on to consumers.

Click here to view

A shop-owner forwarded an e-mail from the Retail Council of Canada the other day. It appears the council, which represents 40,000 storefronts across Canada, is attempting to organize opposition to ongoing increases in credit card fees, the “interchange fees” card companies charge retailers for the right to conduct business though Visa, MasterCard, American Express or any of the other major credit cards.

Read more

The Retail Council of Canada wants to make hidden credit card fees an election issue. The group, which represents more than 40,000 storefronts across the country and calls itself ‘the voice of retail in Canada,’ is targeting interchange fees, what card companies charge retailers for their service.

Read more

Click here to learn more.

[source: StopStickingItToUs.Com]



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“Credit Card Firms Cash in on Fees” (via TheStar.com)

October 19, 2008
[reposted from The Toronto Star, October 19, 2008, Reporter:
Many Canadians received upgraded credit cards earlier this year.The new Visa Infinite cards caused an uproar. People said they didn’t ask for them and didn’t want the inconvenience of changing their recurring payments to a card with a different number.

“Card issuers are more than happy to help cardholders move over any pre-authorized debits, ” said Visa Canada spokesperson Tania Freedman at the time.

Why were customers getting more credit card benefits without higher annual fees? The answer soon became clear to businesses that accepted the upgraded Visa cards. They were subsidizing the cost through higher percentage fees paid to banks.

Two business groups started protest campaigns, hoping to turn this into an election issue.

“We don’t know how these increases can be sustained without sneaking into the pricing system,” says Catherine Swift, president of the Canadian Federation of Independent Business.

Charities are joining the fight, says Derek Nighbor, senior vicepresident of the Retail Council of Canada. They’re worried about higher costs cutting into their donations, since major donors tend to pay by credit card.

The Australian government took action in 2002 and capped merchants’ fees for credit cards at 0.5 per cent. In Canada, retailers pay an average fee of about 2 per cent.

Businesses are bracing for another round of increases. MasterCard Canada changed its fee structure on Oct. 1, increasing the charges for high spenders.

“High-spending cardholders are worth more to a merchant,” says Kevin Stanton, president of MasterCard Canada. “They’re usually part of a loyalty or reward program and they spend 40 per cent more than other cardholders.

“They’re very desirable and highly valuable.” MasterCard has attacked the protest campaign, saying the business groups failed to tell the whole story.

“Consumers do not pay transaction fees for merchants’ credit and debit card processing any more than consumers directly pay merchants’ rent, staff wages or other operational costs,” MasterCard says at its website.

“The CFIB and RCC have deliberately confused and combined references in their materials to merchant fees, which consumers do not pay, with fees that consumers may pay as part of their credit card agreements.” Australians were no better off than Canadians after merchant fees were capped, MasterCard says.

“The reductions were not passed on to consumers as lower prices.” While debit card fees are still low, business groups fear they could go up as well.

Debit card fees average 6 cents per transaction. Unlike credit card fees, they’re not calculated as a percentage of the sale price.

Debit transactions are processed through Interac, a nonprofit organization that sets fees based on the cost of processing them.

Interac has asked the Competition Bureau about restructuring itself as a for-profit entity to compete with Visa and MasterCard, which are trying to increase their share of the debit card market.

That’s why merchants are campaigning hard to cut things off before they start.

[source: TheStar.com]



Visa and MasterCard Responds to Global Recession by Maintaining High Merchant Fees

October 17, 2008

When it comes to Visa and MasterCard’s nearly $50 billion annual hidden tax on Americans, they are in a world all unto themselves.

The economic realities of a global recession and market meltdown is universal, yet retailers are not seeing any real relief from the fees we are forced to pay the banks and those “discount” fees to Visa and MasterCard.

Heck, even OPEC and its cartel-commandeering of gas prices were forced to lower their fees – and big time!  The housing industry is in turmoil, auto manufacturers and car dealers are hemoraging and gas is less than half the cost from just a few months ago, yet interchange fees are stubbornly high.

In the past few months, oil prices have dived below a (once whopping) $70 a barrel; in the past few months crude prices have lost more than half its value.

These are huge numbers. Consumers are buying less and everyone is impacted, even OPEC. Then there is Visa, MasterCard and its member banks and their unbridled greed. They have the market power and strength to collude and fix prices – Visa and MasterCard control about 80% of the credit card business.

The world is hurting and the two giant credit card associations and its thousands of member banks are doing nothing about it, or so it seems. They are artificially keeping those rates at record levels. Why exactly do merchants in the U.S. pay nearly three times other industrialized nations’ interchange fees?

The recent victory by Discover Financial Services, literally on the courthouse steps, flaunts the card associations’ impudence and disregard.  Price fixing, unfair fees and scorn for their customers are a hallmarks for Visa and MasterCard.

Oil price declines are just another example of how powerful the banks are, and just how remorseless they are by protecting their mighty credit card fee scheme.  It seems that they do not care and instead want to milk consumers and merchants for every penny, up to the last minute.

In July, when oil prices peaked, the interchange fees were still at near record levels. Technology, efficiencies and now, the global economic crisis is having no impact on the fiefdom enjoyed by the banks.  Perhaps as the Federal government nationalized the banks, they will demand that their “partners” seize upon this opportunity to review their interchange fees?

After all, the U.S. government is also a player in the merchant interchange battle – they pay millions each year in fees when people charge with credit and debit cards for services and products sold by the government.

In an earlier WayTooHigh.com posting, I quipped that a barrel of gas would more likely fall to $50 than interchange fees be lowered. {who would have known?]  Interchange fees are the cost that merchants are forced to pay to the banks, and in turn to Visa and MasterCard though a not-very “discount” fee.