San Francisco-based Visa instituted an acquirer price increase last year (Digital Transactions News, March 17, 2009). In a conference call with analysts, Visa chief financial officer Byron H. Pollitt Jr. attributed the data-processing revenue growth to VisaNet’s 14% transaction increase and “the continuing effect of previously enacted pricing actions,” according to the Seeking Alpha transcript service.
It looks like another “pricing action” is on the way. Referring to an April price increase by MasterCard Inc., an analyst asked Visa executives if “you have raised merchant assessment pricing as well?” According to Seeking Alpha, chief executive Joseph W. Saunders responded, “Well, we’ve already announced an increase in our acquirers fees similar to the one that MasterCard did and ours is effective in July.” A Visa spokesperson declined further comment. As they do with interchange, acquirers are likely to pass on such network fee increases to their merchant clients.
What are swipe fees? A swipe fee is a fee collected from retailers by the credit card companies and their member banks every time a credit or debit card is used to pay for a purchase. This fee is also known as “interchange.” This fee varies with type of card, size of merchant and other factors, but as much as $2 of every $100 you spend on plastic goes to card issuers. Credit and debit card interchange collected by Visa and MasterCard banks totaled about $48 billion in 2008, triple what it was in 2001. These fees raise prices for consumers. In 2008, the average American family paid about $427 in interchange fees.
How much do hidden swipe fees cost consumers?
Swipe fees add to the price of everything we buy, even if we choose not to use a credit or debit card. Americans paid about $48 billion in credit card swipe fees in 2008 alone, more than all other credit card fees combined.
How are swipe rates determined?
Visa and MasterCard each separately work with their member banks to set swipe fees. The agreement between these banks, which should compete for business, is illegal price fixing and it hurts consumers and merchants.
How fast are swipe fees increasing?
Visa and MasterCard collected about $48 billion in swipe fees in 2008, triple what was collected in 2001. In 2008, the average American family paid about $427 in swipe fees. Swipe fees are rising the fastest on gasoline purchases; payouts to the credit card industry have more than doubled since 2004. Credit card companies and their member banks have increased the amount of swipe fees collected by both increasing rates and encouraging more people to pay by plastic instead of cash.
Don’t these fees just cover the cost of processing the transactions?
Even though advances in technology continue to bring down the cost of transaction processing, swipe fees keep going up. A recent study concluded that only 13 percent of the swipe fees that the big credit card companies collect actually goes for transaction processing. Most of the money goes toward profits for the banks, rewards programs that benefit mostly affluent cardholders and direct mail marketing campaigns that clog mailboxes with nine billion unsolicited credit card offers every year. Many of those unsolicited mailings include so-called “convenience checks”that can be stolen and cashed by someone other than the authorized card holder. Yet the card companies and their banks spend only four percent of the swipe fees they collect on measures to protect consumers from this and other forms of credit card fraud.
How do swipe fee rates in the U.S. compare to fees in other countries?
U.S. swipe fees average close to two percent, while in other industrialized countries like Australia the rate is one-half of one percent and in Europe the rate for cross border transactions is less than one-third of one percent.
Why are swipe fees so high in the U.S.? Visa and MasterCard each separately work with their member banks collectively to set the price of swipe fees. This is illegal price fixing and hurts Americans. Credit card swipe fees have tripled since 2001 and there’s no end in sight, even though the actual cost of transaction processing continues to go down.
Do consumers who pay with cash also pay hidden swipe fees?
American consumers pay the hidden credit card swipe fee on virtually every purchase they make, whether they use a credit card or not because the credit card companies require merchants to spread the cost of these fees to all of their customers. The system is structured so that credit card companies make more money on each transaction when the price of retail goods increases. For example, even though the cost of processing a $1 transaction is virtually the same as processing a $100 transaction, the swipe fee paid on that $100 sale is higher because the swipe fee is calculated as a percentage of the total sale. The higher the sale, the higher the fee.
What is being done about it
What are merchants doing to change unfair swipe fees?
A group of retailers, supermarkets, drug stores, convenience stores, fuel stations, and other businesses are fighting against unfair credit card fees. They want a more competitive and transparent card system that works better for consumers and merchants alike and have formed the Merchants Payments Coalition and launched the website unfaircreditcardfees.com. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. Convenience stores across the nation, who are among the hardest hit by unfair swipe fees because of the fees assessed to gasoline sales, have taken action to alert their customers about these fees and are collecting millions of signatures urging Congress to reform the system. In addition, this website you are visiting (fightswipefees.com) makes it easy for consumers to sign an online petition to Congress or even send a letter directly to their representatives urging action to reform unfair swipe fees.
What are consumers doing to change unfair swipe fees?
Individual consumers are beginning to take action to urge Congress to reform unfair swipe fees. In the summer of 2009, nearly 1.7 million consumers signed petitions at 7-Eleven stores urging such action. This winter, millions more are signing similar petitions in convenience stores across the country or via this website (fightswipefees.com).
In addition, several national consumer organizations are urging Congress to take action. These include:
U.S. PIRG (Public Interest Research Group). In testimony before the House Financial Services Committee, Edmund Mierzwinski (PDF), PIRG’s consumer program director, supported legislation to reform unfair swipe fees and said:
Interchange fees are hidden charges paid by all Americans, regardless of whether they use credit, debit, checks or cash. These fees impose the greatest hardship on the most vulnerable consumers – the millions of American consumers without credit cards or banking relationships. These consumers basically subsidize credit and debit card usage by paying inflated prices – prices inflated by the billions of dollars of anticompetitive interchange fees. And unfortunately, those interchange fees continue to accelerate, because there is nothing to restrain Visa and MasterCard from charging consumers and merchants more.
Americans for Financial Reform. This is a coalition of 200 national, state and local consumer, labor, retiree, investor, community, and civil rights organizations who have come together to spearhead a campaign for real reform in our banking and financial system. In an official policy paper endorsing swipe fee reformt, the group said:
Markets don’t work when there are hidden fees and rules – and no one hides fees and rules better than the credit card companies. Credit card markets lack the information necessary for both consumers and merchants to make informed choices. For merchants, the markets lack adequate information because the associations prevent merchants from accurately informing consumers of the costs of credit card acceptance or attempting to direct them to more efficient and lower priced payment mechanisms. In fact, merchants have no alternative but to accept the card associations’ cards even when the associations significantly increase prices.
[And Visa, too. Interesting that the same banks that owned Visa own MasterCard; the two giant credit card association (which say they are independent) regularly act as if they are operating from the same corner office]
TORONTO, April 16 /CNW/ – Visa supports the Canadian government’s goal to encourage transparency and merchant choice within the payments marketplace – two important pillars on which Visa has built its business domestically and internationally.
Visa already provides merchants much of what today’s Code of Conduct requests payment networks offer, such as full transparency of interchange rates, merchant choice on acceptance of Visa Debit cards, and the ability of merchants to offer discounts for other methods of payment. We appreciate the government’s inclusion of all payment networks to ensure merchants are equally informed through a level playing field.
The White House and Democratic leaders need to push back hard against Republican posturing, making it clear to Americans that robust reform is the only way to protect the system — and taxpayers — from a repeat catastrophe. When Republicans try to block reform, they are doing nothing more than shilling for the banks.
Electronic Payments Coalition, the group funded by Visa Inc., MasterCard Worldwide and the major banks and credit card issuers (payment card networks and financial services companies) just issued this press release. Click here.
We disagree with it, including this key point: The problem with cash discounts is that they don’t allow for different prices depending on the type of payment card used. There are about one-hundred separate merchant interchange fees and it is nearly impossible to know what the cost is for each transaction. In other words, they prevent Visa and MasterCard from competing over the cost of acceptance. The same principle applies to the honor-all-cards rules, which prevent merchants from exercising a preference for lower-cost cards, thereby preventing competitive forces from placing downward pressure on interchange fees. Not to mention the condescending, patronizing attitude that credit card companies know better than merchants how to treat a merchant’s customers.
—————-
PRNewswire release
Merchants Can Already Discount for Cash, But Don’t – So What Would H.R. 2382 Really Do?
Electronic Payments Coalition Unveils the Truth About Rep. Peter Welch’s Interchange Bill
WASHINGTON, Oct. 7 /PRNewswire/ — In advance of the October 8th hearing in the House Financial Services Committee on H.R. 2382, “The Credit Card Interchange Fees Act,” sponsored by Rep. Peter Welch (D-VT), the Electronic Payments Coalition has issued the following statement:
“H.R. 2382 is one of the most egregious assaults on consumer protection that this country has seen in some time. Disguised as a measure to allow for cash discounts – something that is already allowed by federal law and by all card network contracts – the bill would instead open up the door for bait-and-switch advertising schemes, charging additional checkout fees at the register, and discrimination against certain card holders. The bill is chock full of provisions that mean one thing: consumers will pay more so merchants can pay less. Bottom line – retailers don’t want to pay their fair share for a service that brings them more sales and higher profits – and want their customers to pick up the tab instead.”
The Electronic Payments Coalition released today a document detailing the anti-consumer protection measures detailed in H.R. 2382. This document follows this statement.
Rep. Peter Welch’s H.R. 2382 – “The Credit Card Interchange Fees Act” – would…
Leave consumers vulnerable and unprotected against deceptive, bait-and-switch advertising.
Rep. Welch’s legislation would eliminate important consumer protections on how merchants are allowed to advertise their prices – restrictions that are in place expressly to protect consumers. This would allow retailers to promise one low price, then charge more – potentially a lot more – when the customer reaches the cash register. Consumers would be left unprotected, forced to pay the demanded price regardless of what was advertised – and retailers would profit unjustly from their dishonest schemes.
Leave consumers stranded at the checkout counter.
Imagine getting to the front of a long line at the grocery store, only to discover that the store doesn’t accept your alma mater’s credit card. Or they won’t accept the card that donates a few cents of every purchase to your favorite charity. This legislation allows merchants to pick and choose which cards they will accept – and which cards they won’t – with no advance warning to their customers.
Dramatically reduce – or eliminate – the card rewards programs that are used by 80% of American households.
H.R. 2382 would prohibit a slightly higher interchange rate for rewards cards – cards that are traditionally used by customers who are proven to spend more when they shop, in turn providing greater value to merchants. Unfortunately, merchants don’t want to pay for this benefit – and the result would be far fewer rewards for American consumers who value such programs. In fact, similar regulation in Australia has resulted in a 23% reduction in the value of rewards programs for consumers.”
Force businesses to disclose highly confidential financial information to the public and to their competitors.
H.R. 2382 would require every contract, rate agreement, and rule on merchant discount rates to be submitted to the Federal Reserve, which would then be responsible for publishing every bit of it. This would involve literally millions of documents, most containing highly sensitive financial information. The chaos that would result from the sheer volume of contracts – not to mention the compromised financial information – would be incredibly harmful to retailers and to financial institutions.
Falsely characterize interchange as a consumer fee, by requiring that it be disclosed on consumer statements.
It’s simple: consumers don’t pay for the cost of card acceptance. It’s a cost of doing business for merchants that accept cards. Despite this clear distinction, H.R. 2382 would force card issuers to print the amount of interchange, as well as the total amount various merchants paid for each charge – an amount that varies depending on what each merchant negotiated – on consumer’s credit or debit card statements. This is nonsensical, unrealistic, and would ultimately confuse consumers and the financial decisions they make.
About Electronic Payments Coalition
The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC’s goal is to protect the value, innovation, convenience and competition in today’s growing electronic payments system. EPC educates policymakers, consumers, and the media on the system’s role economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce. http://electronicpaymentscoalition.org/
Follow @WayTooHigh on Twitter. Archive of rently posted Tweets.
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American consumers and merchants pay more for credit card interchange fees than consumers and retailers in other industrialized economies6 minutes ago from HootSuite
Merchants don’t mind paying fair share of credit card interchange fees, that amount is ~13% of the fee we (consumers) are FORCED to payabout 6 hours ago from HootSuite
Chase and Wells Fargo cut debit card overdraft fees overdrawn by JUST $5 or less. Not very pro-consumerabout 8 hours ago from HootSuite
O.C. 7-Eleven franchisee takes credit-card fee battle to D.C. http://ow.ly/r9VUabout 18 hours ago from HootSuite
Priceless: The Case That Brought Down The Visa/MasterCard Bank Cartel Book Review & Giveaway http://ow.ly/r8bT4:31 PM Sep 25th from HootSuite
Shares of Visa (NYSE: $V) and Mastercard (NYSE: $MA) are both down over 4% today on concerns regarding potential government legislation4:29 PM Sep 25th from HootSuite
Our most clicked on Tweet today: U.S. Sen. Dodd Pushes for Interchange Fee Reform (NACSOnline) http://ow.ly/r8424:12 PM Sep 25th from HootSuite
Banks and MasterCard and Visa are feeling the heat, but they are masters in manipulating Congress4:01 PM Sep 25th from HootSuite
MUST SEE: Michael Moore’s “Capitalism: A Love Story” banks created virtual casino. http://ow.ly/r7YJ4:00 PM Sep 25th from HootSuite
Credit card companies reached tipping point for excessive fees. Happy 5-year legal battle is being noticed.3:59 PM Sep 25th from HootSuite
Scam to swindle merchants out of ~2% sales payable for antiquated credit card processing fees out of control 6X other nation’s fees.3:58 PM Sep 25th from HootSuite
Banks will be hit hardest from loss of interchange fees, but, remember member banks (1000s) co-own ~50% of $V $MA #Visa#MasterCard3:50 PM Sep 25th from HootSuite
Credit Card shares FALL; Gov’t talks on merchant interchange fees. MasterCard fell 4.8% ( $204.70), Visa dropped 3.9% ($70.66)3:47 PM Sep 25th from HootSuite
No surprise. In the $V and $MA IPO SEC filings, but warned “insolvency” possible if our merchant interchange suit is successful3:45 PM Sep 25th from HootSuite
Bank of America urges federal judge to dismiss the U.S. SEC’s complaint accusing it of misleading shareholders about bonuses [why?]3:38 PM Sep 25th from HootSuite
Credit Card Fees Have Retailers Ready for War – http://bit.ly/WBVub2:24 PM Sep 25th from web
“Credit Card Fees Have Retailers Ready for War” [Agree, I’ve been at war, suing MasterCard, Visa and banks for 5 yrs]. http://ow.ly/r7fB2:22 PM Sep 25th from HootSuite
The Electronic Payments Coalition issued the following statement: (funded by banks, who trusts banks anymore?!) http://ow.ly/qcBf10:50 AM Sep 25th from HootSuite
RT @miaminewsnow: Major Banks Changing Overdraft Fee Rules: When Congress began to debate and credit card reform .. http://bit.ly/IxXQS10:16 AM Sep 25th from HootSuite
Frank backs Rep. Ron Paul’s Fed audit bill – MarketWatch – http://bit.ly/iMH6h6:56 AM Sep 25th from web
RT @glcspdn: CSP Daily News: 7-Eleven taking 1.6 million “Stop Unfair Credit Card Fees” consumer signatures to D.C. http://bit.ly/10HTxQ6:39 AM Sep 25th from HootSuite
As Washington remedies unfair credit card interchange fees, the hundreds of billions in prior years’ charges need to be returned too6:38 AM Sep 25th from HootSuite
“Dodd Will Push To Control Bank Fees For Merchants” (via Kenneth R. Gosselin, Hartford Courant): http://ow.ly/r1Q86:17 AM Sep 25th from HootSuite
U.S. Sen. Dodd Pushes for Interchange Fee Reform (NACSOnline) http://ow.ly/r1MT6:12 AM Sep 25th from HootSuite
Will those banks changing the debit card overdraft fees make it retroactive and REFUND the billions in unfair overcharges?4:54 PM Sep 24th from HootSuite
Senator Chris Dodd is right: “the [credit card] system has gotten completely out of wack.”11:26 AM Sep 24th from HootSuite
Phony consumer-friendly banking overdraft rules. will get fees from other services [interchange raises?], or end when heat is off?10:26 AM Sep 24th from HootSuite
Credit card co’s charging GIANT hidden tax on consumers. Overdraft a debit card = PAY BIG BUCKS: http://ow.ly/kJHb10:15 AM Sep 24th from HootSuite
Report: Nine Scientifically Proven Ways to Get Retweeted on Twitter [via Fast Company] http://ow.ly/qS879:35 AM Sep 24th from HootSuite
U.S. credit card interchange fees ~2X rates in UK, New Zealand. ~4X rates in Australia. ~6X cross border MasterCard rates in the EU9:20 AM Sep 24th from HootSuite
The bank’s “overdraft protection” policy is to PROTECT their balance sheets with unbridled greed at expense of consumers9:19 AM Sep 24th from HootSuite
credit card issuers curbing usurious overdraft policies raises larger question. Where’s the refund for decades of abuse?9:17 AM Sep 24th from HootSuite
Exactly as we said. The banks will use the shift in debit card overdraft fees as marketing tool; See FULL PAGE NYT’s (9/24 p A5) Chase ad.9:13 AM Sep 24th from HootSuite
Way to go JPMorgan Chase – 1 day after heat from usurious ~3500% annualized overdraft fee rates, they advertise a change9:12 AM Sep 24th from HootSuite
Cavalcade of credit card company tricks continues. Wells Fargo cuts overdraft debit card fees due to criticism9:08 AM Sep 24th from HootSuite
How to INSTANTLY save $125,000,000,000 ($125 billion) – take control of credit card interchange “swipe” fees7:15 AM Sep 24th from HootSuite
Citigroup Inc. and Bank of America Corp. each received $45 billion in U.S. Gov’t TARP funds and have yet to repay it10:22 PM Sep 23rd from HootSuite
NICE REACTION TO OUR EARLIER TWEET: BofA refunds 1 person’s debit card overdraft fees AFTER NBCNews how about for EVERYONE http://ow.ly/qNLD7:50 PM Sep 23rd from HootSuite
RT @jordancrowder: @BofA_help Now BOfA charging me overdraft protection on my CC for a service that didnt protect me in the first place!3:32 PM Sep 23rd from HootSuite
WATCH OUT. curtailing debit card overdraft fees is nothing more than a marketing gimmick, look out for higher fees elsewhere3:22 PM Sep 23rd from HootSuite
Nice to see that people are catching onto how the credit card issuers play their game, lower one fee, RAISE OTHERS3:21 PM Sep 23rd from HootSuite
Candice Choi at AP wrote: “Where will banks make up lost overdraft fees?” [Answer: INTERCHANGE FEES] – http://ow.ly/qLIM2:34 PM Sep 23rd from HootSuite
The Mirror Image: Health Insurance and Credit Card Companies (video) http://ow.ly/qLCH2:23 PM Sep 23rd from HootSuite
Think the $38,000,000,000 in bank overdraft fees last year was high? Merchange interchange change credit card fees ~DOUBLE THAT!2:15 PM Sep 23rd from HootSuite
Ron Lieber wrote in the NYT’s that JPMorgan Chase and Bank of America have overhauled their debit card overdraft fees. http://ow.ly/qHmG11:06 AM Sep 23rd from HootSuite
Rulings against Visa and MasterCard in New Zealand are foreshadow of how deeply both credit card associations may fall in U.S.11:00 AM Sep 23rd from HootSuite
Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel by Lloyd Constantine http://ow.ly/peWk10:55 AM Sep 23rd from HootSuite
@ronlieber – Thanks for your NYT’s article on overdraft fees. I added commentary here: http://ow.ly/qHka. Mitch Goldstone 949-474-765410:09 AM Sep 23rd from HootSuite
Banks Revise Overdraft Debit Card Fees, Why Not Interchange Fees Too? http://ow.ly/qHka8:54 AM Sep 23rd from HootSuite
Bank of America refunds all debit card overdraft fees AFTER NBC News segment for one person, how about for EVERYONE? http://ow.ly/pnK77:55 AM Sep 23rd from HootSuite
When consumers say retailers should pay the cost of accepting credit and debit cards, don’t they know THEY ultimately ARE!7:40 AM Sep 23rd from HootSuite
Credit card companies once looked for reasons to keep account balances high are reshaping images as proponents of responsible money mgmt7:05 PM Sep 22nd from HootSuite
Charge-offs+delinquencies are rising as unemployed credit-card holders are falling behind. Interchange revenues declining http://ow.ly/qAHQ4:41 PM Sep 22nd from HootSuite
The press release FLUFF announcing the $$$ “Chase Sapphire” credit card FAILS to mention HIGHER interchange fee costs – http://ow.ly/kH0G10:20 AM Sep 22nd from HootSuite
MORE UNFAIR CREDIT CARD FEES: Banks charging $35 for a cup of coffee (via NYT’s editorial 8/20) http://ow.ly/kJC510:05 AM Sep 22nd from HootSuite
Join Mitch Goldstone (ScanMyPhotos.com) and other photo imaging industry execs in Cologne, Germany (Oct 21-22) http://ow.ly/q6Hi8:20 AM Sep 22nd from HootSuite
Q: Why should retailers be taken on a ride when affinity reward credit cards R used? A: Consumers ultimately pay = NO FREE REWARDS7:35 AM Sep 22nd from HootSuite
FEES charged by airlines to process credit card payments are excessive, disproportionate to the cost of the transactions http://ow.ly/quFJ7:34 AM Sep 22nd from HootSuite
Credit card surcharges disproportionate to true costs, airlines hitting passengers with hefty credit card booking fees http://ow.ly/qsDF4:49 AM Sep 22nd from HootSuite
“battle is brewing over the processing fees that banks charge merchants each time a customer uses a credit or debit card” http://ow.ly/pLYP10:40 AM Sep 21st from HootSuite
hidden cost of credit cards should be studied by Gov Accountability Office re effects of interchange fees on consumers7:38 AM Sep 21st from HootSuite
How to INSTANTLY save $125,000,000,000 ($125 billion) – take control of credit card interchange “swipe” fees7:15 AM Sep 21st from HootSuite
What Is “Interchange” [video: Electronic Payments Coalition] http://ow.ly/qcFw10:53 AM Sep 20th from HootSuite
Merchants don’t mind paying fair share of credit card interchange fees, that amount is ~13% of the fee we (consumers) are FORCED to pay10:39 AM Sep 20th from HootSuite
The Electronic Payments Coalition issued the following statement: (funded by banks, who trusts banks anymore?!) http://ow.ly/qcB910:36 AM Sep 20th from HootSuite
Think of how cool it would have been if Erin Brocovich had Twitter; used it as we are against nation’s lgst antitrust case in U.S. history10:33 AM Sep 20th from HootSuite
Fact: Visa and MasterCard STILL charge interchange fees, but they call that portion “Discount Fees” Where’s the Discount???10:31 AM Sep 20th from HootSuite
Visa and MasterCard say banks charge the interchange fees, but WHO OWNED 100% of Visa and MasterCard pre IPOs? BANKS!10:30 AM Sep 20th from HootSuite
Sen Chris Dodd, head of the Senate Banking Committee, plans to propose merger of 4 bank agencies into one super-regulator.6:35 AM Sep 20th from HootSuite
The issue with credit card interchange “swipe” fees is a ~$48 bln annual price-fixing overcharge. My Ecommerce biz FORCED to accept CCs5:35 PM Sep 19th from HootSuite
Emotional radio brodcast just after WWII from Germany – The Jewish Service Heard Round the World; YouTube: http://ow.ly/pZLf9:20 AM Sep 19th from HootSuite
When consumers say retailers should pay the cost of accepting credit and debit cards, don’t they know THEY ultimately ARE!7:28 AM Sep 19th from HootSuite
RT @BoycottBanks: Retail Credit Card Fees Much Higher in the USA….: Americans are being forced to pay significant.. http://bit.ly/1BJK2j7:24 AM Sep 19th from HootSuite
U.S. retailers pay credit-card fees up to six times greater than those paid by retailers in other countries, (MPC)7:21 AM Sep 19th from HootSuite
Electronic Payments Coalition (funded by MasterCard, Visa and credit card issuers) attacking its customers! http://ow.ly/pc3H4:30 PM Sep 18th from HootSuite
Other than illegal price-fixing, technology should have significantly led to MUCH lower merchant interchange credit card swipe fees1:05 PM Sep 18th from HootSuite
The U.S. pays approximately 60% of swipe fees globally – about double the U.S. percentage share of global GDP11:20 AM Sep 18th from HootSuite
Banks raked in an estimated $48 billion in swipe fees in 2008 – an average of $427 per American household in just one year.11:05 AM Sep 18th from HootSuite
Attorney Lloyd Constantine of Constantine Cannon has book coming out: “Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel10:55 AM Sep 18th from HootSuite
Hidden swipe fees cost Americans more than all credit card annual fees, cash advance fees, over-the-limit fees, and late fees combined10:20 AM Sep 18th from HootSuite
Interchange fees started out in the 1960s as a way for banks to cover the cost of processing credit card transactions10:02 AM Sep 18th from HootSuite
U.S. credit card interchange fees ~2X rates in UK, New Zealand. ~4X rates in Australia. ~6X cross border MasterCard rates in the EU8:20 AM Sep 18th from HootSuite
How to INSTANTLY save $125,000,000,000 ($125 billion) – take control of credit card interchange “swipe” fees7:02 AM Sep 18th from HootSuite
“battle is brewing over the processing fees that banks charge merchants each time a customer uses a credit or debit card” http://ow.ly/pLYB6:40 AM Sep 18th from HootSuite
Credit Card interchange fees around the world, why is the U.S. among the highest? (Merchants Payments Coalition) http://ow.ly/pWJa6:05 AM Sep 18th from HootSuite
Credit card interchange fees have more than TRIPLED in the amount collected in the past 8 years!5:05 AM Sep 18th from HootSuite
The same reckless, predatory lending practices that led to the sub-prime mortgage meltdown still prevail with credit cards (MPC)5:45 PM Sep 17th from HootSuite
@DebitPrepaid – We get retail customers insisiting debit cards be processed as credit cards to get benefits1:49 PM Sep 17th from web in reply to DebitPrepaid
Visa and MasterCard JUST aren’t getting the message. Other businesses are lowering costs, but them. Just got the bi annual increase letter1:40 PM Sep 17th from HootSuite
Bank of America “Keep The Change” Round-Up credit card program; another scheme to get more interchange fees? http://ow.ly/pS8p1:28 PM Sep 17th from HootSuite
Merchants Payments Coalition 2 release study today: European countries, Canada & New Zealand handle interchange fees http://ow.ly/pM0o10:45 AM Sep 17th from HootSuite
About 90% of all business in U.S. from sm biz, not giant chain stores. Ending merchant credit card fees benefit us little guys too.10:45 AM Sep 17th from HootSuite
All About the Visa and MasterCard Promotional Gift Card Scheme (repost) http://ow.ly/kdYg10:00 AM Sep 17th from HootSuite
More consumers using debit cards (50.4%) over all noncash sales (AP), but ScanMyPhotos.com and many merchants process it at higher CC rates9:55 AM Sep 17th from HootSuite
MasterCard Europe has promoted UK head of marketing Rita Broe to the position of group head of European marketing9:40 AM Sep 17th from HootSuite
“The Stimulus Didn’t Work” (WSJ John F. Cogan Opinion); Really? Why then is stock market at intra level HIGHS?!8:25 AM Sep 17th from HootSuite
Merchants also launched antitrust suit against the banks and credit cards in connection with interchange fees. [that’s us] http://ow.ly/pOir7:50 AM Sep 17th from HootSuite
Janet Morrissey at TIME Mag writes that retailers ready to fight credit cards fees. We’re 5 yrs in already! http://ow.ly/pOgV7:48 AM Sep 17th from HootSuite
Visa Inc survey claims consumers want retailers to pay interchange fees, but THEY are ultimately the ones paying it! http://ow.ly/pO5r7:34 AM Sep 17th from HootSuite
Better question from Visa Inc funded survey is: “how do you feel about illegal, anticompetitive price-fixing?” http://ow.ly/pO3S7:31 AM Sep 17th from HootSuite
Not to laugh too loud, but you gotta read this Visa inc. commissioned survey – http://ow.ly/pO287:30 AM Sep 17th from HootSuite
SHAME on Visa, MasterCard, credit card companies for misguided effort to shift message from BANK GREED to chain store profiteering.7:00 AM Sep 17th from HootSuite
Merchants seek public’s support in fight with credit card issuers http://ow.ly/pMSt6:00 AM Sep 17th from HootSuite
Merchants Payments Coalition 2 release study today: European countries, Canada & New Zealand handle interchange fees http://ow.ly/pLZY3:33 AM Sep 17th from HootSuite
Retailers Battle Credit Card Fees – http://bit.ly/CwXD23:22 AM Sep 17th from web
Improved processing technology and the weak economy should be driving card-acceptance prices down6:54 PM Sep 16th from HootSuite
Gold Rises to 18-Month High on Inflation Concern, Weaker Dollar9:25 AM Sep 16th from HootSuite
ScanMyPhotos.com lowered rates over the years from $5 to under 5-cents, yet technology isn’t playing role in record credit card fees9:10 AM Sep 16th from HootSuite
More credit card merchant interchange fee INCREASES in the works for early fall. NO JUSTIFICATION other than greed, exploiting new laws.7:50 AM Sep 16th from HootSuite
Every time you charge your Big Gulp at 7-Eleven, a credit card company swallows part of the profit. http://ow.ly/ifsX6:05 PM Sep 15th from HootSuite
Buy a restaurant gift card and ZERO added fees; buy a Visa or MasterCard gift card and $$$ extra.11:40 AM Sep 15th from HootSuite
the cost of accepting PIN-debit cards rose 305% between 1996 and 2007 http://ow.ly/k8mq10:05 AM Sep 15th from HootSuite
Other than illegal pirce-fixing, technology should have sigtnificantly led to MUCH lower merchant interchange credit card swipe fees8:57 AM Sep 15th from HootSuite
American Bankers Assn say merchants get enormous benefit from credit cards; WRONG, HUGE $48+ billion hidden COST8:40 AM Sep 15th from HootSuite
Bank of America refunds all debit card overdraft fees AFTER NBC News segment for one person, how about for EVERYONE? http://ow.ly/pnJV7:44 PM Sep 14th from HootSuite
looking forward to reading, Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel by Lloyd Constantine http://ow.ly/peWO11:55 AM Sep 14th from HootSuite
Officially called “Credit Card Fair Fee Act,†ought to be called: “Illegal Price-Fixing Swindle Act by Visa, MasterCard and the Banks”10:30 AM Sep 14th from HootSuite
Network Rivalry Sparks 10-Year Quadrupling of PIN-Debit Pricing (via Digital Tracations) http://ow.ly/k8mf10:05 AM Sep 14th from HootSuite
in 2001, Sonta Sotomeyer ruled on prior class-action in Visa Check, 280 F.3d 124 by merchants challenging Visa and MasterCard fees7:11 AM Sep 14th from HootSuite
Attorney Lloyd Constantine of Constantine Cannon has book coming out: “Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel4:43 AM Sep 14th from HootSuite
Electronic Payments Coalition (funded by MasterCard, Visa and credit card issuers) attacking its customers! http://ow.ly/pc3E4:30 PM Sep 13th from HootSuite
credit card assn ad SHOULD show receipt listing ADDED credit card interchange fee as extra line item: http://ow.ly/pc3Z4:20 PM Sep 13th from HootSuite
When I sued Visa, MasterCard + its member banks for illegal price-fixing of credit card fees back in ’05, never imaginged power of Twitter9:55 AM Sep 13th from HootSuite
RT @timharold: Learning about credit card processing fees this morning, bottom line i’m paying way too much, any ideas?9:33 AM Sep 13th from HootSuite
Just returned from three-weeks in Europe. Off again in October to address photo conf in Germany, than New Zealand and Australia6:30 AM Sep 13th from web
Seems a last thread of profitability for banks are their monopoly over merchant credit card interchange fees10:40 AM Sep 12th from HootSuite
Other than illegal anticompetitive price-fixing, how can Visa, MasterCard, 1000s of member banks justify soaring interchange fees?2:45 PM Sep 11th from HootSuite
Competition – what Visa, MasterCard, banks know little about, is why 0 interchange fees will benefit consumers = lower costs10:35 AM Sep 11th from HootSuite
Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets10:15 AM Sep 11th from HootSuite
Improved processing technology and the weak economy should be driving card-acceptance prices down http://ow.ly/k8lT (Digital Transactions)10:00 AM Sep 11th from HootSuite
NBC Nightly News (Aug 16) segment: credit card co’s raising fees, lowering benefits, yet interchange fees record high http://ow.ly/kn4c9:05 AM Sep 11th from HootSuite
Consumers Petition for Lower Credit Card Swipe (interchange swipe fees TRIPLED since 2002) http://ow.ly/kXqu8:40 AM Sep 11th from HootSuite
Think $38,000,000,000 in bank overdraft fees last year was high? Merchange interchange change credit card fees ~DOUBLE THAT!5:15 PM Sep 10th from HootSuite
The Commerce Commission and Mastercard have signed an agreement settling the commission’s claim that the credit card company fixed fees.12:55 PM Sep 10th from HootSuite
Circle K: Interchange fees are their 2nd largest cost after payroll. http://ow.ly/kFNy11:15 AM Sep 10th from HootSuite
Electronic Payments Coalition (EPC) [funding by banks, Visa, MasterCard] misinformation – http://twit.ac/EK2s.html10:35 AM Sep 10th from HootSuite
Officially called “Credit Card Fair Fee Act,” ought to be called: “Illegal Price-Fixing Swindle Act by Visa, MasterCard and the Banks”10:30 AM Sep 10th from HootSuite
only justification [for soaring interchange fees} is when you have an anti-competitive business model and you can illegally fix prices10:00 AM Sep 10th from HootSuite
Same banks reporting HUGE profits from “overdraft fees” often same ones that rec’d BILLION in U.S. bailout $’s8:30 AM Sep 10th from HootSuite
credit card issuers ADVERTISE to FORCE consumers to use plastic vs cash, then disassociate for taking responsibly for the surged in charges8:00 AM Sep 10th from HootSuite
Credit Card Follies: Abolish interchange fees altogether (via Kevin Drum, Mother Jones) http://ow.ly/hGsO #180007:25 AM Sep 10th from HootSuite
$2 trillion (~1/2 of all credit card lines of credit might be rescinded next year (CNBC, NEW News) http://ow.ly/kn8O4:20 PM Sep 9th from HootSuite
Bank of America drops arbitration requirement (via AP) – http://ow.ly/k7KW1:40 PM Sep 9th from HootSuite
JUST ONE MORE FOR THE ROAD: “Credit card issuers boost rates ahead of tougher rules” (LA Times) http://ow.ly/kHHR11:50 AM Sep 9th from HootSuite
Consumers have to pay additional fees or earn more credit card rewards for perks http://ow.ly/kdeX = WE ARE OVERPAYING INTERCHANGE FEES11:40 AM Sep 9th from HootSuite
The new JPMorgan Chase “Chase Sapphire” credit card harms merchants/consumers WE pay the rewards, higher interchange fees10:15 AM Sep 9th from HootSuite
More Scheming by Visa and MasterCard. Anatomy of How an Electronic Gift Card “Works:” http://ow.ly/kdWq9:50 AM Sep 9th from HootSuite
It’s not a privilege to accept Visa / MasterCard credit / debit cards. It”s a requirement for online co’s; they wield 80% market power.1:00 PM Sep 8th from HootSuite
Question isn’t extraordinary merchant value from credit cards, it’s about antitrust violations – illegal, anticompetitive price-fixing11:15 AM Sep 8th from HootSuite
credit card company merchant interchange swipe fees ARE wipings independent businesses off the map in neighborhoods across the U.S.10:30 AM Sep 8th from HootSuite
Credit card co’s NOW charging hidden tax on consumers. Overdraft a debit card = PAY BIG BUCKS: http://ow.ly/kJGB10:10 AM Sep 8th from HootSuite
Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets9:15 AM Sep 8th from HootSuite
Mastercard agrees to let New Zealand banks issuing credit cards set interchange rates, merchants able to apply surcharges to payments8:55 AM Sep 8th from HootSuite
get rid of interchange fees AND credit card reward gimmicks, after all consumers end up paying for those “free” rewards7:20 AM Sep 8th from HootSuite
Twitter Finally Profitable: Think of all the billable hours from legal, advocacy firms charging Visa, MasterCard and the banks to read this!7:00 AM Sep 8th from HootSuite
SHAME on Visa, MasterCard, credit card companies for misguided effort to shift message from BANK GREED to chain store profiteering.7:00 AM Sep 8th from HootSuite
Why Won’t Visa Give U.S. Competition & Transparency Promised to New Zealand on Credit Card Fees? (via @NCASOnline) http://ow.ly/jVvB6:50 AM Sep 8th from HootSuite
ScanMyPhotos.com FORCED to accept Visa and MasterCard for our ecommerce business, as are most online companies, they wield 80% market power7:35 AM Sep 7th from HootSuite
Lawsuit against MasterCard. Visa over interchange fees NOT ABOUT “extraordinary value to merchants” but ILLEGAL PRICE FIXING8:05 AM Sep 6th from HootSuite
4-party credit card payment systems is broken; interchange fees no longer cost-based, floods banks with $ at expense of consumers10:55 AM Sep 4th from HootSuite
The press release FLUFF announcing the $$$ “Chase Sapphire” credit card FAILS to mention HIGHER interchange fee costs – http://ow.ly/kH0A10:20 AM Sep 4th from HootSuite
MORE UNFAIR CREDIT CARD FEES: Banks charging $35 for a cup of coffee (via NYT’s editorial 8/20) http://ow.ly/kJBS10:05 AM Sep 4th from HootSuite
As Citigroup and Bank of America Post Huge Profits, Why are Bank Fees Going up? (via Anthony Mason CBSNews) http://ow.ly/hzsx7:20 PM Sep 3rd from HootSuite
banks, credit card co’s protect key source of profits: credit card swipe fees (HuffPost) http://ow.ly/gVwv5:45 PM Sep 3rd from HootSuite
Q: Why should retailers be taking on a ride when affinity reward credit cards R used? A: Consumers ultimately pay = NO FREE REWARDS2:20 PM Sep 3rd from HootSuite
Competition – what Visa, MasterCard, banks know little about, is why 0 interchange fees will benefit consumers = lower costs11:35 AM Sep 3rd from HootSuite
Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOn10:45 AM Sep 3rd from HootSuite
Interchange fees antiquated as manual credit card imprinters and carbon copy receipts, no longer COST BASED, now GREED BASED10:25 AM Sep 3rd from HootSuite
About 90% of ALL overdraft bank fees HIT 10% of poorest Americans: http://ow.ly/kJLl10:20 AM Sep 3rd from HootSuite
GREAT TO HEAR: Circle K petition expects to deliver three-quarters of a million signatures protesting card fees.11:10 AM Sep 2nd from HootSuite
media spending for credit card ads PLUNGED 50% means LOWER interchange change fees as marketing was part of the cost, so why HIGHER fees?11:05 AM Sep 2nd from HootSuite
credit card companies cut ad spending 50% (Brandweek) = less risk and lower mkting costs, yet record interchange fees? http://ow.ly/k8UI8:05 AM Sep 2nd from HootSuite
Rulings against Visa and MasterCard in New Zealand are foreshadow of how deeply both credit card associations may fall in U.S.10:00 AM Sep 1st from HootSuite
Credit card companies are cancelling cards and reducing benefits even though merchant interchange are paying the costs, incl rewards.4:15 PM Aug 31st from HootSuite
Q: Why should retailers be taking on a ride when affinity reward credit cards R used? A: Consumers ultimately pay = NO FREE REWARDS2:20 PM Aug 31st from HootSuite
You just have to watch this how-to video. The key facts about illegal antitrust price-fixing are omitted, as are the reasons why merchant interchange fees in the U.S. are upwards of six-times what other industrialized nations pay. Remember, this video and the organization promoting it is funded by the banks and Visa and MasterCard.
The problem is that few understand what these fees are; it is a hidden tax on consumers – amounting to upwards of $48 billion in anticompetitive charges each year. As proof, since this video was posted, only about 450 people viewed it, which my guess was largely from those who produced it.
WayTooHigh: Q: How can banks (MasterCard / Visa) site “competitive pressures” regarding need for soaring credit card rates? They own the Monopoly board!
WayTooHigh: You know it’s a good day for consumers and retailers when Visa publicly expresses extreme disappointment: http://ow.ly/kdXF
WayTooHigh: Q: Why hasn’t MasterCard, Visa, Chase, CitiGroup, BofA, etc… not been shut down for collusion and credit card price-gouging. A: Dunno
WayTooHigh: More Scheming by Visa and MasterCard. Anatomy of How an Electronic Gift Card “Works:” http://ow.ly/kdWc (new post)
WayTooHigh: MAJOR SCAM: Visa, MasterCard gift cards issued rather than checks. They keep micro-payments remaining, because you can’t exceed your balance
WayTooHigh: @nancytrejos– As credit card companies lower reward benefits merchants interchange fees should be too, WE (consumers) pay those rewards
WayTooHigh: Looking forward to watching NBC’s Meet the Press on Sunday – my hero, Rachel Maddow takes on someone I can’t stand, Dick Armey
WayTooHigh: Rob Reeg. pres Global Technology & Operations for MasterCard Worldwide, frightens consumers http://ow.ly/izsH with misinformation
WayTooHigh: credit card companies cut ad spending 50% (Brandweek) = less risk and lower mkting costs, yet record interchange fees? http://ow.ly/k8UC
WayTooHigh: Why should retailers be taken on a ride when affinity reward credit cards are used? Consumers ultimately pay = NO FREE REWARDS
WayTooHigh: media spending for credit card ads PLUNGED 50% means LOWER interchange change fees as marketing was part of the cost, so why HIGHER fees?
WayTooHigh: As recession-weary consumers are swearing off their credit cards, credit card brands are swearing off advertising http://ow.ly/k8Ua
WayTooHigh: Network Rivalry Sparks 10-Year Quadrupling of PIN-Debit Pricing (via Digital Transactions) http://ow.ly/k8mc
WayTooHigh: only justification [for soaring interchange fees} is when you have an anti-competitive business model and you can illegally fix prices
WayTooHigh: Improved processing technology and the weak economy should be driving card-acceptance prices down http://ow.ly/k8lP (Digital Transactions)
WayTooHigh: RT @Denrael: @WayTooHigh there is competition but challenge is getting wallet space [Not really, MasterCard and Visa wield 80% Market Power]
WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOe
WayTooHigh: FIGHT CREDIT CARD FEES: Write Congress – Share this link with fellow merchants http://ow.ly/iENK
WayTooHigh: Circle K Circulates Petition Chain placing petition protesting credit-card fees in its convenience stores http://ow.ly/iEN1
WayTooHigh: More consumers using debit cards (50.4%) over all noncash sales (AP), but ScanMyPhotos.com and many merchants process it at higher CC rates
WayTooHigh: New to ScanMyPhotos.com: For updates on our antitrust lawsuit against Visa, MasterCard, major banks See: http://ow.ly/k4Wj
WayTooHigh: Had media interview w/ biz pub. Explained credit card companies get away with high rates because they = monopoly, fix-prices, NO competition
WayTooHigh: Credit Card Issuers’ trick: Ads showing “fun” ways to design photos on credit card = distraction, should be URGING you to READ terms #18000
WayTooHigh: Three bills have been introduced in the 111th Congress that address the issue of interchange fees http://ow.ly/jNRA
WayTooHigh: It’s Visa and MasterCard that should thank consumers every time they use a debit / credit card at stores: http://ow.ly/iftW
WayTooHigh: From MasterCard Inc. Q2 Earnings Call, NO explanation about price-fixing and intl interchange fees that are 1/3 that in U.S.
WayTooHigh: NZ Commerce Commission settled out of court w Visa in deal that will change fees charged on all retail transactions in NZ http://ow.ly/jLA1
WayTooHigh: Commerce Commission And Visa Reach Agreement To Settle Credit Card Interchange Fee Proceedings http://ow.ly/jLmA
WayTooHigh: Our economy lost trillions POST Bush’s $300 p/ person stimulus program. But, Republicans silent on anything but attacking current plan.
WayTooHigh: SHAME on Visa, MasterCard, credit card companies for misguided effort to shift message from BANK GREED to chain store profiteering.
WayTooHigh: Congress must support “Credit Card Fair Fee Act,” especially in a recession. Takes ~$60 bln out of banks unfair rev into consumers pockets
WayTooHigh: Visa, MasterCard look abroad for growth (via Reuters) [Even thought U.S. interchange fees ~3x more than abroad?] http://ow.ly/jIw9
WayTooHigh: Stop Unfair Credit Card Fees Tell Your Elected Representatives To Act On Interchange Fees http://ow.ly/iEOa
WayTooHigh: When anticompetitive and illegal interchange fee price fixing ends, family-owned restaurants, dry cleaners, etc. will be SAVED
About three months ago, I bought new tires and was pleased to learn that it included a $50 rebate. But, the hoops to redeem that incentive were challenging.
Here is what happened:
Rather than receive a $50 check (which would have no interchange fee), a Visa-branded credit card was mailed and JUST received. The credit card issuers have created a giant windfall scheme for themselves at the expense of consumers.
The rules for redeeming the card is extensive and means that if there is a micro-balance, they keep it. I did a previous posting on this situation.
To access the funds on the electronic payment card you MUST present the card to the service station attendant inside when you fill up. Don’t try to insert it into the gas station pumps’ electronic card reader. It won’t work. Another rule is: “Please note. Ask the attendant to swipe the card after you have filled up to assure the success of your transaction.” Yeah, right! Try doing that, as clerks must swipe the card to reserve payment up front.
For regular checkouts, “you must always select ‘Credit’ when making purchases. You are authorized to make purchases that do not exceed your available balance.” This is a pure SCAM. Who makes an exact $50 purchase? Try using the “gift” card at a restaurant. Imagine being on a date, presenting the card and having the server explain that you can’t! Either way, the merchant is charged the much higher credit card interchange fee, rather than the debit card flat rate. If it was a check that we deposited into our bank account, there would be no fees and we easily would have the entire gift valued, rather than these games which reduces the value.
My guess is many consumers get frustrated and use part of the balance and dispose or file away the card and thus the issuer gets to keep the balance. What happens to the company that tendered the rebate “gift card? Did they pay full price to the card issuer, or a discount? I can only imagine the amount never redeemed.
Another scheme and pure profit center for the credit card issuers.
Improved processing technology and the weak economy should be driving card-acceptance prices down, according to Mitch Goldstone, president and chief executive of ScanMyPhotos.com in Irvine, Calif. “The only justification is when you have an anti-competitive business model and you can illegally fix prices,” says Goldstone, the lead plaintiff in a pending class-action lawsuit against bank card interchange. “That’s what it’s all about.”
Click here to read entire Digital Transactions article. (Aug 14, 2009)
In response to Andrew Martin’s July 16th “Card Fees Pit Retailers Against Banks” New York Times article, I submitted this response:
Dear Editor,
I appreciated your thorough article, ‘Card Fees Pit Retailers Against Banks,’ New York Times, July 16, 2009, describing the serious problem of exorbitant and ever-increasing interchange fees incurred by merchants in the United States.
It is ironic that in a day and age when many businesses face possible extinction due to rapid advancement in technology that card payment systems like Visa and MasterCard continue to thrive and grow using magnetic strips embedded in plastic cards, which is a device closer to the bygone era of carbon copies than to advance technology.
All merchants should applaud the populist pressure and Congressional efforts to confront this hidden tax on the economy represented by interchange fees. It is important to note, however, that the problem is even greater for Internet-based merchants who have no choice but to accept payment cards and are captives to this system developed by the banks.
Perhaps this is the reason that banks impose even higher interchange fees on internet merchants, who also often receive no payment guarantee. That is why we, along with many other traditional merchants, both large and small, are leading efforts in the In re Payment Card Interchange Fee antitrust lawsuit in the Eastern District of New York to eliminate interchange fees and other abusive rules imposed on merchants.
Hopefully, through our efforts, combined with those of other merchants, their customers and Congress, we can succeed in eliminating this abuse of market position by the banks and their card companies.
WayTooHigh: credit card issuers ADVERTISE to FORCE consumers to use plastic vs cash, then disassociate for taking responsibly for the surged in charges
WayTooHigh: Andrew Martin’s NY Times interchange article DOESN’T mention ZERO interchange fees in some nations, 4 writing checks, PINbased ATM in Canada
WayTooHigh: Not good news for small business financing and the economy: CIT says discussions with government have ceased, with no likelihood of support
WayTooHigh: Way to go MasterCard! Charge customers up to ~30% merchants up to ~5%, yet you get 16% discount on legal settlement http://ow.ly/gs5k#18000
WayTooHigh: It takes unbridled greed by Visa, MasterCard and the credit card issuers cartel to continue raising “SWIPE” interchange fees in a recession
WayTooHigh: ScanMyPhotos.com FORCED to accept Visa and MasterCard for our ecommerce business, as are most online companies, they wield 80% market power
WayTooHigh: Later this month stay tuned for more profiles on ScanMyPhotos.com & we’ll be sure to mention our battle against Visa, MasterCard fees #18000
WayTooHigh: technology has brought our cost to scan a photo from $5 to 5-cents, yet MasterCard and Visa keep raising their unjustfied interchange rates
WASHINGTON — New transaction fee rate increases announced by credit card companies Visa and MasterCard are slightly under 2 cents per affected transaction, yet are expected to raise more than $600 million in revenues, according to a report by DigitalTransactions.com
MasterCard will increase its “Network Access and Brand Usage Fee” April 17, from 0.5 cents per transaction to 1.85 cents—a 270 percent increase—while Visa will increase its “Acquiring Processing Fee” from 0.5 cents to 1.95 cents—a 290 percent increase, with additional fees possible, according to NACS—the Association for Convenience and Petroleum Retailing, which opposed the proposed hikes.
“This begs the question: How can two ‘competitors’ announce price increase of nearly 300 percent at the same time in a recession?” NACS Senior Vice President of Government Relations Lyle Beckwith said in a statement. “From what we’ve seen with credit card interchange fees, the answer is obviously that two competitors with excessive and abusive market power can do what they want.”
Merchant-acquiring experts expect merchants to bear the cost of these fees because acquirers will simply pass them through to clients. “The ones we’ve talked to aren’t too excited about it,” an acquiring executive, who asked for anonymity, told the Web site. “It’s one of the bigger fee hikes.”
In a statement Visa told DigitalTransactions.com: “Visa Inc. regularly reviews its pricing, as any business would, and makes adjustments where appropriate depending on such factors as the value delivered to clients and the need to be competitive. Over the years, Visa has become a symbol of international acceptance, reliability and convenience, based on its commitment to provide superior value to clients. These clients, in turn, are able to offer competitive products and services to their customers. Financial institutions set their pricing to cardholders and merchants.”
In 2007, credit card fees cost convenience stores $7.6 billion, with the largest component being credit card interchange fees, which are a fixed fee and a percentage of each transaction, according to NACS. These fees average 1.8 percent in the U.S., which has the highest interchange rate of any industrialized country.
“The credit card fees that U.S. retailers pay are outrageous,” Beckwith said. “These newly announced fee increases are beyond outrageous. At a time when small businesses are feeling the economic pain of the recession, it is unconscionable that Visa and MasterCard can give themselves their own ‘bailout’ by slapping 300 percent increases on their fees.”
Lots of WayTooHigh.com readers today and many from Wells Fargo too. Did they surf our site on their own time, or bill American taxpayers to read about their egregious New York Times ad campaign? Whoever I discussed the ad with equally asked the same question: why didn’t Wells Fargo’s CEO John Stumpf just sent an email or Twitter his staff to let them know just how much he values his “team.”
With all the unprecedented mismanagement by the nation’s banks, including thousands of Visa and MasterCard member banks which collectively owned both giant credit card associations, are TARP government funds being used to bailout Visa Inc? From today’s press release, we learn that Visa Inc. “has deposited $1.1 billion into the litigation escrow account…” Where did this enormous capitalization come from? With little oversight, is it possible that the government’s TARP bailout funds helped pad Visa’s litigation account?
Transaction has the effect of a $1.1 billion Class B share repurchase
SAN FRANCISCO, Dec. 22 /PRNewswire-FirstCall/ — Visa Inc. (NYSE: V – News) today reported that it has deposited $1.1 billion into the litigation escrow account previously established under the company’s retrospective responsibility plan (the “Plan”).
Under terms of the Plan, when Visa funds the litigation escrow its U.S. financial institutions, the sole holders of Class B shares, bear the expense via a reduction in their as-converted share count.
“This transaction not only adds the necessary funds to our litigation escrow, but effectively acts as a $1.1 billion Class B share repurchase program,” said Joseph Saunders, Visa’s chairman and chief executive officer. “It has always been our stated intent to return excess cash to our shareholders in the form of dividends and share repurchases. We are obviously pleased that our strong financial position and excess cash flow allows us to do this.”
The Plan was established at the time of Visa’s initial public offering. It provides coverage and a payment mechanism for judgments or settlements in specific U.S. legal cases, protecting Visa and its Class A and Class C shareholders from any direct losses.
The deposit of the funds into the escrow account reduces the conversion ratio applicable to Visa’s Class B common stock outstanding from 0.7143 per Class A share to 0.6296 per Class A share. On a converted basis, the 245,513,385 Class B shares currently outstanding are equal to 154,566,658 Class A shares of common stock.
The deposit of loss funds has the effect of a repurchase of 20,800,824 Class A common share equivalents from the Company’s Class B shareholders. The amount paid per share represents the volume weighted average price (VWAP) of the Company’s Class A common shares for the 15-day trading period December 1, 2008 to December 19, 2008.
About Visa: Visa operates the world’s largest retail electronic payments network providing processing services and payment product platforms. This includes consumer credit, debit, prepaid and commercial payments, which are offered under the Visa, Visa Electron, Interlink and PLUS brands. Visa enjoys unsurpassed acceptance around the world and Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in more than 170 countries. For more information, visit www.corporate.visa.com
Contacts:
Jack Carsky or Victoria Hyde-Dunn, Investor Relations
Visa Inc.
Tel: +1 415 932 2213
E-mail: ir@visa.com
Paul Cohen or Sandra Chu, Media Relations
Visa Inc.
Tel: +1 415 932 2564
E-mail: globalmedia@visa.com
CHICAGO — Calling outrageous credit card fees the most important battle faced by the industry, NACS President and CEO Hank Armour said the industry continues to put pressure on the issue, “2009 looks to be the watershed year in which we may finally get significant relief,” he said during the Opening General Session at the NACS Show 2008 on Oct. 5, 2008.
“This is the biggest issue that our industry has faced in decades, and we’ve taken it head on,” said Armour. “With the tremendous help and support of many of you, we made a lot of progress this year.” The Credit Card Fair Fee Act was successfully passed out of the House Judiciary Committee (H.R. 5546), and the legislation was also introduced in the Senate (S. 3086), he noted.
“We obviously have the credit card companies’ attention,” said Armour, referencing what he described as public relations stunts that Visa and MasterCard attempted this summer to deflect attention away from the issue of interchange. “While Visa and MasterCard claim they have fixed the problem, they haven’t. The only thing they fix — and they continue to do so — is the price,” said Armour to applause.
Pharmacist Greg Matthews uses a sign to inform customers about payments at Workers Choice Pharmacy.
Greg Matthews tries to discourage customers at his East Side pharmacy from using credit cards to pay for prescriptions because transaction fees on cards cuts into his already slim profit margin.
Private “insurance reimbursements are so bad, then you add the credit card (fee) to it, and they’re is just no profit at all,” said Matthews, owner of Workers Choice Pharmacy at 10501 Gateway West.
A lady the other day paid her $80 co-pay” on a $120 prescription with a credit card. “I was going to make $3.48,” but the credit-card fee took $1.98 so Matthews only made $1.50 on the transaction, he said. The other day a customer was going to pay a $1.05 prescription payment with a credit card, and “I said, ‘Forget it.’ I just gave it to him” because of the credit-card fee, he said.
Robert Barron, co-owner of Barron’s Superette, a small grocery store at 7555 Acapulco on the East Side, has a different view. He said he doesn’t mind paying the fees for credit cards and debit cards because those cost his store less than handling checks.
“It’s better to pay the fees than have to worry about insufficient fund checks, or checks you can never collect on,” Barron said. Barron estimated 90 percent of his customers now pay for their groceries with a debit or credit card, or food-stamp card.
In August, Barron’s paid $1,072 for debit- and credit- card fees, which includes fees by a company which processes the electronic payments for his store, Barron said.
Matthews said he pays an estimated $2,000 to $2,500 a year in credit-card fees for his small business. Credit-card transaction fees, specifically the interchange fee set by credit- card companies and collected by banks that issue the cards, have become a hot issue with retailers in recent years.
The Merchants Payments Coalition, a national group of retailers, including supermarkets, drug stores, convenience stores and others, has been campaigning to lower the fees. The coalition is pushing for legislation in the U.S. Congress to set up a mechanism to let retailers negotiate card transaction fees with the credit-card companies. Some members of the coalition also are part of pending lawsuits consolidated into one case in a New York federal court alleging price-fixing of fees by MasterCard, Visa and several banks.
“What we want them to do is negotiate with us (merchants) a price fair for their service,” said John Motley, senior vice president for the Food and Marketing Institute in Washington, D.C., a member of the coalition. “The reason the issue is so big for us (grocery stores) is the average profit within the food retailing industry in the U.S. is about 1.2 percent.” The credit-card fees increase product costs to consumers, he said.
“Interchange fees for credit-card transactions average around 2 percent of each transaction dollar amount,” Motley said. Supermarkets were offered a low interchange fee years ago to encourage supermarkets to accept cards, but that “rate is now disappearing” because premium credit cards are becoming more prevalent and have a higher fee, he said. Fees on debit cards used with a PIN number average around one-half percent, which is not as much of a problem, he said.
Gasoline retailers earlier this year began complaining about being hurt by rising credit-card fee costs because customers were charging larger amounts due to rising fuel prices. MasterCard and Visa made adjustments in fee charges for fuel retailers, the companies said in statements issued this year. Last year, $42 billion in interchange fees were collected, and this year that number is projected to grow to almost $49 billion, Motley said. That is a 16.7-percent increase. Only a small portion of the fees go for transaction costs, he said.
Visa and MasterCard, the nation’s two largest credit-card companies, said the companies each set their own card interchange rates, but they receive no revenue from interchange fees. The interchange rate is what the merchant’s bank pays to the cardholder’s bank for taking on the risk, said Denise Dunckel, a Washington, D.C.-based spokeswoman for Visa. “Visa makes its money from contracts with banks,” she said.
Sharon Gamsin, a spokeswoman for MasterCard’s headquarters in the New York City areas, told the El Paso Times in May that MasterCard makes its money from fees it charges banks that issue cards.
The interchange fee is part of a merchant discount fee, which is negotiated between the merchant and its bank for credit-card and debit-card transactions, according to information from MasterCard. The interchange rate is set high enough for banks to have an incentive to issue credit cards and low enough to encourage businesses to accept the cards, the credit-card companies said.
“I think merchants are getting a good value for what they pay for. The alternative (cash or checks) costs more” to handle,” said Linda Echard, president and CEO of ICBA Bancard in Washington, D.C., an Independent Community Bankers of America subsidiary that provides credit-card services to community banks. The interchange and merchant fees are important revenue sources that allow banks to stay in the credit-card business, she said.
In Australia, where the government stepped in and reduced interchange rates, the number of cards being issued has decreased, Echard said. A MasterCard statement said Australian credit- cardholders are now also paying higher interest rates and fees because of the decrease in interchange rates.
Credit fee facts
Interchange fees average 2 percent of the dollar amount of each transaction and are paid by a merchant’s bank to the cardholder’s bank to compensate the bank for risks and costs of maintaining credit- card accounts.
Merchants pay for interchange fees and other fees attached to credit- and debit-card transactions through a merchant discount fee. That fee goes to the merchant’s bank.
Visa and MasterCard said they make no revenue directly from interchange fees, but get their money through charges to banks that issue credit cards in their systems.
If you didn’t trust Visa and MasterCard’s member banks before, just wait.
I wonder whether anyone can score a lower approval rating than Congress – hovering at a paltry 10 percent? The banks, along with Visa and MasterCard must be among the most despised entities in the nation.
Poll anyone whether they trust the banks now.
How about asking American’s how they feel about the credit card associations’ merchant interchange fee pricing schemes?
WayTooHigh.com has more than 1,100 prior postings, spanning more than three-and-a-half years. We will continue the battle and draw attention to this issue.
A funny thing happened on the way towards justice over Visa and MasterCard’s alleged price-fixing collusion charges. The anxiety faced by the two leading card associations and its thousands of member banks turned into a temporary distraction when many banks failed due to other pricing schemes.
Three-and-a-half years ago, when I became part of the first antitrust class action filings against Visa, MasterCard and its member banks, things seemed pretty calm. Millions of merchants knew that the credit card associations violated the law and illegally fixed prices and used their cartel-like market power to dominate. With treble damages, the potential financial liability amounted to anywhere north of $300 billion. That was a great deal of money. Visa and MasterCard warned that if they were found guilty, they risked insolvency.
How the financial markets and the world has changed. Many of the banks named as defendants are no more. Even big investment banks and brokerage firms have been bailed out or closed down. Some of the giant financial institutions were nationalized by the government, bought at fire sale prices or actually became insolvent and declared bankruptcy. Many of the regulations that were designed to preclude such a meltdown are the same types of antiquated policies that enable MasterCard and Visa to maintain their market power and charge fees that are unfair in today’s high tech world, where electronic transactions should move at lightening fast speed and cost next to nothing to process.
Who would have thought that what was a mighty complaint became dwarfed in size?
Today, Republicans are calling for the head of the SEC, supporting nationalization of a major industry, seeking to plunder another $700 billion and more to bail out what they knew all along was a slow motion car crash. Less regulation and oversight was their mantra.
The question is with the Credit Card Fair Fee Act and the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation threatening to force MasterCard, Visa and its member banks to give up billions in unfair fees, what is the government doing now? Will they wait until even more money is wasted? Joining millions of retailers, I understand that through illegal antitrust price fixing, the nearly $50 billion in annual merchant interchange fees is wrong and in violation of the law.
According to the Wall Street Journal, today we read that Federal Reserve Chairman Ben Bernanke wants “swift action on a Treasury Department plan to buy illiquid mortgage-linked securities and avoid severe spillover effects on the economy.”
Why haven’t U.S. presidential candidates Barack Obama and John McCain both publicly addressed what amount to the largest antitrust case in our nation’s history. And, why is our government nearly silent on this issue which is placing an unfair burden on shop owners and consumers? It seems that they are chasing the news that the banks’ management failed and caused this nearly one-trillion dollar mess, but why aren’t they being proactive and commenting on Visa and MasterCard’s price fixing business model?
This is another mess decades in the making.
The once mighty banks are now looking weak and threatened. Their arguments about credit card fees is on the same level as they are handling their other financial crisis.
Our nation is facing extraordinary economic stress on the financial markets, but it seems that government and politicians only put out fires when the entire building is engulfed in flames and not before. The U.S. is forced to pay among the highest merchant interchange fees in the world, when technology and efficiencies over the years have led to nearly no actual costs to transact a credit card transaction.
While Visa and MasterCard attempt to limit the outrage over their windfall profiteering at the pumps, the ineffective rate reductions on gasoline electronic payments, were just met with new rate increases for merchants.
PIN-based debit card fees traditionally were fixed, rather than charging a percent of each transaction, as is the case with signature cards. However, I was just informed by the electronic payment processing company, Chase Paymentech, which handles transactions for ScanMyPhotos.com and 30 Minute Photos Etc. that our rates have again changed. Even though our nation is facing a dire recession and many businesses are forced to close, Visa and MasterCard continue with their unbridled greed at the expense of American retailers and consumers.
In response to our email to Chase Paymentech inquiring about a letter we received in May announcing that PIN pricing changes will take effect on June 1st it appeared that PIN debit transactions will no longer be a low, flat fee of 55-cents. Now it will be a flat fee, plus a transaction fee as well. Today, we received June 2008 statement and it appears that we are no longer paying just $0.55-cents for processing PIN based debit cards but we are now paying $0.20-cents PLUS a percent of the sale depending upon if it is an Interlink, Maestro, Pulse or Star Southeast. The percent that is being passed through is GREATER than if we processed the transaction as a “Signature Based” transaction vs. a PIN based transaction.
See the below recent email exchanges from Chase Paymentech Solutions LLP, in their own words:
“…[S]ome of the debit network fees have changed and these changes will be passed onto you. You have been getting the debit network fees passed onto you (part of interchange pass-thru), so this is not a change.”
“The letter that was sent out is notifying you that some of the debit network fees have changed and these changes will be passed onto you. You have been getting the debit network fees passed onto you (part of interchange pass-thru), so this is not a change.”
“On top of the Pin-based debit network fees which are passed through, I believe the $0.55 would remain the same.”
“This is part of the pin-debit network fees passed through, as described below. Pin-based debit is not always the lowest cost option, since it depends on your transactions amount. If you feel you would like to do signature based transactions, then you can process these transactions either way –pin-based or signature based.”
See below for a sample of signs that consumers, retailers and service station operators displayed during The Great American Rally Against Visa and MasterCard’s Fees on Gasoline.
For an update on how Visa and MasterCard are forcing service station operators to lose their life investment and close their doors, click here to read the Wall Street Journal, July 7th article, “Gas Stations Hit Skids: Higher Costs Close Nearly 3,000 in a Year” (subscription required).
Excerpt: “Aziz Hassan, who owns five stations in Sherman, knows all about the profit squeeze. A truckload of gasoline costs $35,000, compared with $10,000 just a few years ago, he said. Most of his profits are going to credit-card fees, he said, which eat up about nine cents of every gallon of gasoline his customers buy with a credit card. This leaves him little to cover costs such as electricity to run the pumps.”
SAMPLE PLACARDS DISPLAYED DURING THE GREAT AMERICAN RALLY AGAINST VISA AND MASTERCARD’s FEES ON GASOLINE
Irvine business owner organizes rally to call attention to the fees credit card companies are raking in with rising gas prices.
By Olga BelogolovaPublished: July 03, 2008 04:10 PM
More than 30 people gathered at the corner of Jamboree and Barranca Avenues this morning to protest high gas prices and high credit card fees. The protest, organized by small-business owner Mitch Goldstone, took place during the morning commute.
On the cusp of Independence Day weekend, protesters gathered wearing American flags and patriotic gear.
One of them, Mary Lou Barry of Tustin, dressed in a full American-flag jacket and glistening blue hat, spoke about the gas problem. “People are just accepting it,” she says. “We have to talk about it and maybe get some attention.”
The high gas prices are not only affecting drivers, explained Mitch Goldstone, but independent business owners as well, whom, he says, “are going out of business because of Visa and MasterCard.”
Navdeep Bassi, a 7-Eleven franchise owner, is feeling the weight of these fees. “Credit card fees are killing us,” he says. “We make no profit.”
Also personally affected by the gas prices, Lauren Young came to the protest with her daughter Samaia.
Having no car, Young explains: “It’s hard to get rides because a lot of people don’t want to do it. It makes a lot harder,” Young says, “doctors appointments and everything.”
Overall, organizer Mitch Goldstone was very pleased with the turnout. “Everyone is so passionate about record gas prices,” he explained, “especially right before our holiday weekend.”
Goldstone is the president of ScanMyPhotos.com and 30 Minute Photos, Etc., which are located near the protest location as well as a nearby Chevron station.
For more information about gas prices, credit card fees and Goldstone’s efforts, go to WayTooHigh.com
Visa and MasterCard credit card fees inflate the price of gas by charging consumers and merchants hidden credit card fees that total 8-10 cents a gallon that inflate already skyrocketing gasoline prices. Credit card fees now tally up to $2.00 or more per fill up for many drivers.
Service stations owners and consumers are paying record credit card fees
as Visa, MasterCard, and their member banks reap the windfall from the 100% increase in the price of gasoline since 2007.About two dollars of every $100 the consumer spends in stores or buying gasoline goes directly to the credit card industry in the form of the interchange fee, the biggest credit card fee you’’ve never heard of. Americans pay three times as much in interchange fees as Europeans.
Interchange started as a fee to pay for credit card processing more than 50 years ago when everything was done by hand. Now computers do all the work, but the fees have skyrocketed in recent years.
American businesses and consumers paid $42 billion in interchange fees in 2007 alone.
The price of gas is the BIGGEST issue in the country, bigger than the ““economy”” according to one survey (Yahoo). Two-thirds consider gas prices an extremely important issue, edging the economy and outpacing health care and Iraq as the country’s most distressing problem. In November, when gas cost about $1 a gallon less than today, just under half rated it extremely
important.
With $4-plus gasoline, the credit card industry typically takes in 8-10 cents per gallon in interchange fees, far more than the service station owner if he or she is making any money at all. (Many service station owners are currently losing money on every gallon they sell.)
Except for OPEC, nobody makes more money from skyrocketing gasoline prices than Visa & MC.
Interchange fees are set in secret by the credit card industry. The Credit Card Fair Fee Act (HR 5546,S 3086) is a solution that would create a competitive market outcome and bring transparency to the broken credit card market by allowing merchants a seat at the negotiating table.
Visa’s announcement on June 26th that it will restructure some interchange fees on gas purchases is their first public acknowledgment that the 100% increase in gasoline prices combined with the 100% windfall they have enjoyed from higher credit card revenues in the last year is a major problem for American consumers. However, Visa’s latest actions will make things worse for most people by raising –– not lowering –– credit card interchange fees on the average gasoline transaction. It will mean higher credit card fees for the average gas station. And Visa’s actions do not address the issue of skyrocketing food costs as well as gasoline.
Interchange fees hit consumers coming and going. For example, when truckers fill their tanks to get the goods we buy to market, the interchange fees charged can be as much as $20-25 for a single fill-up. Trucking costs, in turn, increase the costs of all the goods those trucks deliver. So, not only do the credit card companies increase costs on a gallon of milk when a consumer buys it with a credit card at the grocery store, credit card interchange also pumps up the price of that gallon of milk through the trucker’s fuel costs. This ripple effect hurts consumers and businesses in ways they do not realize — and never see coming.
It’’s time to…… -Wake up Congress to stop hidden credit card
Consumers and Merchants Tell Congress to Support the Credit Card Fair Fee Act
IRVINE, Calif.–(BUSINESS WIRE) Consumers and merchants alike will rally in Irvine on July 3rd, Thursday morning at 7:30 – 9:00 am at the Chevron station at Jamboree and Barranca Parkway to call for independence from Visa and MasterCard’s hidden credit card fees that add another 8-10 cents a gallon on top of already skyrocketing gasoline prices.
Consumers and merchants will also be rallying in favor of the Credit Card Fair Fee Act which would end price-fixing by the credit card industry and help cut interchange fees. This bill would allow retailers to have a seat at the table to negotiate with the credit card industry for the terms and rates of the fees.
“Service station owners and consumers are paying record credit card fees as Visa, MasterCard, and their member banks reap the windfall from the 100% increase in the price of gasoline since 2007,” said Mitch Goldstone, event organizer and editor of WayTooHigh.com– The Credit Card Interchange Report. Goldstone is also president and CEO of 30 Minute Photos Etc. and ScanMyPhotos.com.
With $4-plus gasoline, gas customers typically shell out $2 or more to the credit card industry every time they fill up. Goldstone said, “Except for OPEC, nobody makes more money from skyrocketing gasoline prices on American consumers than Visa and MasterCard member banks – over $10 billion this year alone if gas prices stay above $4.”
“About two dollars of every $100 consumers spend in stores or buying gasoline goes directly to the credit card industry in the form of the interchange fee, the biggest credit card fee you’ve never heard of. Interchange has skyrocketed in recent years. Interchange is a hidden fee; the rates are set in secret by the credit card industry,” said Goldstone.
American businesses and consumers paid $42 billion in total interchange fees just in 2007 on all goods and services, far more than they paid in late fees, over-the-limit fees, annual fees, universal default, double cycle billing, exchange fees, and inactivity fees combined. Consumers not only pay more than they should through unfair fees but also through inflated retail prices, especially on gasoline.
The credit card industry has come under increased scrutiny from the public, consumer groups, the Federal Reserve, and Congress in the past three years for their unfair credit card practices, policies and fees. Interchange fees have been the subject of hearings three times in recent years under both the Republican and Democratic Congresses. Large number of Democrats and Republicans favor the Credit Card Fair Fee Act; it has bi-partisan support in both chambers of Congress.
Rally to Stop Skyrocketing Credit Card Fees on Gasoline Ask Congress to support the Credit Card Fair Fee Act
Irvine, CA — June 29, 2008 – In honor of July 4th consumers and gas station owners alike will demand independence from Visa and MasterCard’s hidden credit card fees that add another 8-10 cents a gallon on top of already skyrocketing gasoline prices.
Service stations owners and consumers are paying record credit card fees as Visa, MasterCard, and their member banks reap the windfall from the 100% increase in the price of gasoline since 2007.
About two dollars of every $100 the consumer spends in stores or buying gasoline goes directly to the credit cardindustry in the form of the interchange fee, the biggest credit card fee you’ve never heard of. Interchange started as a fee to pay for credit card processing; it has skyrocketed in recent years. American businesses and consumers paid $42 billion in total fees just in 2007.
With $4-plus gasoline, the credit card industry typically makes 8-10 cents per gallon in interchange fees, far more than the service station owner if he or she is making any money at all. (Many owners are currently losing money on every gallon they sell.) Americans shell out as much as or up to $2 per fill up to the credit card industry every time they fill up. Except for OPEC, nobody makes more money from skyrocketing gasoline prices than Visa and MasterCard. The cost of a cashless society is way too high if you let the credit card industry set the price.
Interchange fees are set in secret by the credit card industry. The Credit Card Fair Fee Act is a solution that would create a competitive market outcome and bring transparency to the broken credit card market by allowing merchants a seat at the negotiating table.
WHO: WayTooHigh.com – The Credit Card Interchange Report
WHAT: Consumers and merchants rally to stop unfair credit card fees on gasoline
WHEN: Thursday, July 3, 7.30 to 9.00 AM
WHERE: Chevron station at Corporate Park Plaza –––– corner of Jamboree and
Barranca Parkway in Irvine (near John Wayne Airport) CONTACT: Mitch Goldstone, editor, WayTooHigh.com – The Credit Card Interchange Report and president & CEO, ScanMyPhotos.com
WayTooHigh.com – The Credit Card Interchange Report
92 Corporate Park Plaza, Suite B, Irvine, CA 92606
949-474-7654, Goldstone (at) ScanMyPhotos.com
“ABA SAYS JUSTICE DEPARTMENT AND FTC LETTERS MAKE STRONG CASE AGAINST INTERCHANGE LEGISLATION.”
The American Bankers Association does it again. What a surprise that they issue a press release regarding a recent comment regarding the Credit Card Fair Fee Act. What is purely stunning is that the bank trade association could even suggest that the consumer friendly legislation is “plainly anti-competitive and would violate fundamental antitrust principles.” Have they no shame?
Visa and MasterCard with its 80% mammoth market power and well documented anti-competitive practices [See prior ~1200 posts below] is the reason millions of merchants are involved with our class-action litigation.
Shortly, when you do an online dictionary search under the term “antitrust,” Visa and MasterCard will be used as the model for why the named worldwide defendants conspired to illegally fix prices and force merchants to pay supra-competitive Interchange fees. Their actions are the reason we have the protections of the Sherman Antitrust Act.
While the Banks’ trade association’s president, Edward Yingling, said “this legislation will hurt competition and harm consumers, plain and simple,” he is wrong. Competition is non-existent and millions of retailers and consumers worldwide are harmed every day due to the card associations unbridled greed.
Did MasterCard and Visa just give American Express about $4.0 billion dollars to settle the prior antitrust suit [read more] because they are nice guys, or because they violated the law? I look forward to an apology and recognition from the ABA that they were wrong.
Arguments and press releases like theirs is silly. Ex: “The fact is the card payment system brings considerable benefits to all parties to a transaction,” said Yingling. This might have been the same argument the railroads used in the 1800s when they forced farmers to either transport their goods via trains or let it rot. That is also the reason the Sherman Antitrust Act was enacted. Merchants like us [ScanMyPhotos.com] are forced to accept Visa and MasterCard or we will be out of business, just as the farmers were when they were forced to use the railroad network, as merchants are today forced to use the electronic payment network. Differing networks, same violations.
If the ABA was representing consumers and retailers, rather than financial institutions, they would understand the facts, rather than parrot the replies from high-powered legal teams.
I recently bought a new AT&T wireless cell phone and received a $50 rebate, but not so fast. The refund was not a standard check, but rather as an electronic payment AT&T branded Visa Promotional Card. The challenge was to find merchants which accepted the card. I tried at the gas pump, I tried at an Albertsons Supermarket. It seemed I had better luck at Starbucks.
If you thought the merchant interchange fees to Visa and MasterCard and its member banks were high and not transparent, these electronic “gift” cards are unfair and spawn another blemish on the credit card payment network. Unlike with cashing a check, each time the card is used, merchants are forced to pay interchange fees on each transaction.
The costs are staggering (about $50 billion each year) and then there is another hidden cost. The card I received was for $50.00, but as the value was used up, I now have a balance of about $1.60. What can I buy for exactly $1.60. These micro balances are then difficult to redeem, yielding the two giant card associations, its member banks and companies promoting them with extra, hidden windfall profits at the expense of consumers.
Because these are not “credit cards” how it is processed and accepted differs from merchant to merchant. In the case of the AT&T Visa Promotional Card, it clearly is branded as a “debit” card, yet the detailed accompanying instructions included this important information:
“When shopping, simply tell the cashier to process your card as a ‘credit’ transaction, not a ‘debit’ card.” [Editors note: this means that retailers are forced to pay a percent of each sale rather than a low flat-rate debit card rate].
“To purchase gas, have the service station attendant process the transaction inside. Use your AT&T Promotional Card to make purchases anywhere Visa debit cards are accepted.” [Editors note, just do not use it as a “debit” card warns the informational page that was mailed with the card].
Purchases can be made without usage fees or finance charges…… [Editors note: does that mean there are no merchant interchange fees for these transactions? From reading the instructions it explains there are no “usage fees”?]
Thomas W. Evans wrote a New York Times Op-Ed [“Sue OPEC,” June 19] calling for United States to sue the Organization of the Petroleum Exporting Countries (OPEC) due to the oil cartel’s illegally setting production quotas and maintaining “artificially high prices for crude oil” which is in violation of U.S. antitrust laws.
According to Mr. Evans, an industry expert “estimated that the real production cost was $15 a barrel.”Even a spokesperson for OPEC was reported to say that if market manipulation was omitted, the price for a barrel of oil could be $70.
While it is difficult to actually sue the oil cartel, there is another cartel that faces nearly identical collusive market power.
Imagine if OPEC controlled 80% of the world’s oil reserves and illegally controlled and fixed prices?Imagine if there was another similarly brutal cartel with such an impenetrable network that they could reap $50,000,000,000 in annual hidden, non-transparent fees that few even knew about? While OPEC has a level of international immunity from U.S. federal antitrust laws, Visa, along with MasterCard and their thousands of member banks do not.The parallels are mirror-like identical. Yet, there is a difference – Visa and MasterCard’s merchant interchange fees are based in an electronic payment network that is antiquated and broken.
Imagine if OPEC controlled 80% of the world’s oil reserves and illegally controlled and fixed prices?Imagine if there was another similarly brutal cartel with such an impenetrable network that they could reap $50,000,000,000 in annual hidden, non-transparent fees that few even knew about? While OPEC has a level of international immunity from U.S. federal antitrust laws, Visa, along with MasterCard and their thousands of member banks do not.The parallels are mirror-like identical. Yet, there is a difference – Visa and MasterCard’s merchant interchange fees are based in an electronic payment network that is antiquated and broken.
Imagine if OPEC controlled 80% of the world’s oil reserves and illegally controlled and fixed prices?Imagine if there was another similarly brutal cartel with such an impenetrable network that they could reap $50,000,000,000 in annual hidden, non-transparent fees that few even knew about? While OPEC has a level of international immunity from U.S. federal antitrust laws, Visa, along with MasterCard and their thousands of member banks do not.The parallels are mirror-like identical. Yet, there is a difference – Visa and MasterCard’s merchant interchange fees are based in an electronic payment network that is antiquated and broken.
According to published reports, the actual cost to transact a credit card payment is about 13% of the total fees collected. Similar to OPEC, they are a mighty cartel that illegally fixes prices and manipulates the electronic payments market. The difference is that while OPEC is not currently being sued, Visa, MasterCard and its major member banks are being sued, by us and millions of merchants in what could be the largest antitrust class-action in our nation’s history.
MasterCard Inc., the giant credit card company based in Purchase, said this week it will drop 40-year-old transaction fees that European regulators have declared illegal.
The European Commission said last December the company had to devise an alternative to its interchange fees that doesn’t harm consumers. The commission said MasterCard would face a daily penalty of up to 3.5 percent of sales if it did not revise the interchange fees.
The interchange fees are paid from bank to bank on each cross-border payment transaction. The fees cost consumers as much as 13.5 billion euros (about $21 billion) a year, according to the European Retail Round Table, a lobby group for 14 retailers.
MasterCard said it would drop the fees as of June 21, but will continue discussions with the commission about a better way to structure the fees.
The company is also appealing the commission’s decision to the European Court of First Instance.
The total annual merchant interchange fees continue to soar and reflect a growing discontinuity with the nation’s recession and realities that technology and efficiencies should be lowering fees. Instead, according to Robin Sidel’s May 14th WSJ article [“Consumers May Pay For Credit-Card Bill“], merchant interchange fees “generated roughly $50 billion last year.” Robin explained on the phone this afternoon that this rate was based on information from The Nelson Report,
Just how monstrously tainted are these anticompetitive charge-card fees that violate federal antitrust laws?
Look at it this way: Visa and MasterCard’s member banks’ interchange fees last year were much greater than three-times Microsoft’s entire net income of $14.8 billion dollars last year. The total interchange fees charged to merchants and paid by consumers last year were greater than the combined net earnings of Chevron ($17.5 billion), Hewlett-Packard ($7.2), Intel ($6.2), Walt Disney ($4.6), Apple ($3.4), Lockheed Martin ($3.0) McDonald’s ($2.3), Federal Express ($2.0) and Walgreen ($2.0). [source: Forbes 400].
WayTooHigh.com – The Credit Card Interchange Report Comments:
Even financial interpreter Jim Cramer is in for a grueling week as Visa and MasterCard readies for what both companies warn might lead to their “insolvency” [according to their SEC filing statements].For an update on Thursday’s planned Capital Hill combat against the giant credit card associations and its member banks, click here to read Jessica Holzer’s May 12thThe Hill column.
You know there are splinters in Visa and MasterCard’s haywired argument when lobbyists for the banks and the credit unions join forces; while they are gasping, we are ready to further illuminate the issues. It has been more than three-years since launching the class-action complaint to arrest this $40 billion annual hidden tax on merchants and consumers.
Let us not forgot that interchange fees were designed decades ago to cover the cost of a four-party electronic payment network – back when we used manual credit card imprinters and mailed in thick bundles of carbon copy credit card receipts to clear the payments. Back then, it took days to transfer funds, today it is instant and efficient.
Today’s efficiencies have done away with the antiquated payment process, yet the fees are higher than ever. Why the disparity as interchange rates abroad are a fraction of the nearly 2.0% tax charged in the U.S.?
This is the “perfect storm.”
We are ready to explain why interchange fees are obsolete, illegal and anti-competitive. Even the banking industry’s shareholders are in for another bombshell so audible and eclipsing that the impact from their executive’s round of previously misfortunate decisions and billions in prior writeoffs may be petite in comparison. A trial by jury allows fort trebled damages.
When was the last time you heard the U.S. Federal Reserve explain that interchange fees “dampen innovation” for check writing? Never: there are no interchange fees to clear checks. Likewise, why hasn’t the Fed explained that merchants “derive huge benefits” from accepting paper checks for payment? Again, there are no fees to clear a check and if it is so significant a cost, why hasn’t the banking industry demanded interchange fees for that payment form?
The banking lobbyists are ready and so are we, but our story is being told by regular shop owners to personalize the issue. After years of toil, merchants and consumers are at the cusp of forcing the demise of these unbridled and unnecessary interchange fees on American’s and our neighbors around the world. The American public is fed up with the banking industry’s mismanagement and audacity; the days of cartel-like price-fixing will vanish, just as did those bulky manual credit card imprinters also disappear.
Visa and MasterCard profiting from a devastating natural disaster?
This is another image crisis for the two leading credit card associations and their thousands of member banks. When the public understands that with each electronic payment donation to help the people affected by the Asian cyclone, Visa and Mastercard are doing more than clearing the charges. They are reaping profits from a global tragedy. There should be additional pressure placed on their continued profiteering – this time at the expense of vital aid needed for that region of the world, ratherthan to help fund the banks’ other fiscal missteps.
If you thought that Visa, MasterCard and thousands of banks were heartless by reaping windfall profits during our economic energy crisis and record fuel prices, just wait. Even more dismaying than forcing credit and debit card holders to pay upwards of $2.50 for merchant interchange fees when they pay at the pump, is the current Asian disaster.
The United Nations estimates 1.5 million people have been “severely affected” by the May 2nd cyclone that swept through Myanmar. The death toll in that Cyclone-ravaged region could hit hundreds of thousands of people. What are Visa and MasterCard doing? As far as we know, every time an electronic payment donation is sent to The American Red Cross and other relief efforts, the two leading credit card associations and their thousands of member banks make a profit. The interchange fee, which could be upwards of 2.0% from each donation is being delivered to financial institutions, rather than in direct aid to the people in need.
Even worse is that the American Red Cross is in violation of their credit card merchant agreement and is risking disqualification from Visa and MasterCard because nation’s premier emergency response organization demands a minimum electronic payment of $5.00. Click here to read how they explain the merchant interchange fee issue.
Will Visa and MasterCard waive its interchange fees for American Red Cross and other related transactions?
As the pressure grows for Citigroup Inc’s new CEO, Vikram Pandit to address the troubled bank’s missteps, I wonder whether he has the influence to make the call to Visa and MasterCard on behalf of all the card associations’ member banks?
Before reprinting today’s Visa Inc. press release, these thoughts:
Our merchant interchange antitrust litigation is based on many years of alleged illegal activities. Just as if a convicted bank robber apologizes and cleans up their act, they are still in violation of the law. So too are Visa and MasterCard. Because most of the same banks that control a large percentage of Visa’s newly public shares are also owners of MasterCard, we expect that the same decision will be forthcoming by the other credit card association.
Moving forward, this is a smart decision and one more confirming action that Visa recognizes that they were in error and are quickly trying to fix their business model; from creating an independent board, to less ownership by the banks, to posting interchange rates online (although mostly as an attempt to respond to merchant concerns) and now this.
The Visa Inc. May 9th press release is reprinted below.
SAN FRANCISCO, CA, May 8, 2008 Visa Inc. announced today that it will for the first time make its Visa International and Regional Operating Regulations available publicly, effective May 15, 2008.
The Operating Regulations, which will be available on Visa’s corporate website at www.corporate.visa.com, are the set of rules which govern the participation of issuing and acquiring financial institutions in the Visa system.
“As Visa continues to evolve to meet the needs of customers, we are committed to providing our partners and interested parties with greater insight into Visa’s operations,” says Joseph W. Saunders, Chairman and CEO, Visa Inc.“Greater transparency is one of the ways we hope to strengthen our working relationships in the marketplace.”
Previously, Visa Inc. made its Visa USA Operating Regulations available to merchants and third party agents under a non-disclosure agreement.On May 15, Visa’s rules will be publicly available to interested parties, including all Visa rules related to merchants’ participation in the system.However, to protect cardholder and merchant safety and the Visa system, Visa has omitted proprietary and competitive information, as well as certain details from the rules relating to the security of the network.For example, in the merchant rules, Visa has omitted authorization limits by country and processing codes which could aid fraudsters.
“Today’s announcement builds on our commitment to making Visa transparent in an increasingly competitive environment,” adds Saunders.“While our operating regulations only govern our client financial institutions, we believe that merchants and others will benefit from access to the rules, which provide a greater understanding of the complexities of electronic payments.”
Merchants do not have a “wonderful relationship” with Visa and MasterCard. Fact is we are suing them for what could amount to hundreds of billions of dollars in antitrust violations.
There is no transparency for inter interchange fees. Ask any merchant what any single electronic payment transaction was. If Visa and MasterCard want transparency, post the exact charge on every credit card receipt. Posting upwards of one-hundred pages on their website with encrypted interchange fee codes is not transparent.
Consumers do not know that they are being charged nearly 2% in interchange fees.
Interchange fees are illegally set by Visa, MasterCard and its member banks. This is illegal and identical to what the railroads did in the 1800s which forced the creation of the Sherman Antitrust act.
There is no competition. Visa and MasterCard control 80% of the entire electronic payment network. The fees are not competitive, any more than OPEC is competitive with its similar cartel-like pricing.
“The hearing was held by the House Judiciary Committee’s Task Force on Competition Policy and Antitrust Laws. It was delayed more than an hour due to prolonged votes on the House floor, according to a Judiciary Committee spokesman.”
“Bill Douglass, chief executive of gas retailer distributor Douglass Distributing Co. also noted that credit card companies collect 9 cents per gallon of gas sold, leaving many retailers with no profit from the gas they sell.”
Where are the U.S. presidential candidates on the issue of Visa and MasterCard’s merchant interchange fees?
Their silence is almost as concerning as are their lack of initiatives to boost support for the U.S. currency. With today’s news that crude-oil futures reached a record of $121.49 a barrel, more attention must be directed to Visa and MasterCard’s cartel scheme to force service stations, all merchants and consumers to hand over more than $40 billion each year in questionable merchant interchange fees.
If the presidential candidates really wanted to draw attention to unfair gas hikes, they should look beyond temporary tax fixes and instead demand that Visa, MasterCard and its member banks address this issue and how it impacts our nation’s economic energy crisis. Each motorist fill-up means that Visa and MasterCard’s member banks reap upwards of $2.50 when credit cards are used. Think of the trucking industry and the cost for diesel fuel and how much more money is being syphoned off and into the pockets of Visa and MasterCard and its member banks.
This interchange fee system is long broken, antiquated and must be fixed. The national media attention’s spotlight on the presidential candidates would be an ideal forum to supplement what WayTooHigh.com – The Credit Card Interchange Report has been championing for more than three years.
Click here to read the April 8th Wall Street Journal “Letter to the editor” from Rep. John Conyers (D., Mich.), Chairman House Judiciary Committee and Rep. Chris Cannon (R., Utah), Ranking Member House Judiciary Subcommittee on Commercial and Administrative Law.
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In the Journal’s March 29 editorial, “Credit-Card Wars,” you note that, “as consumers we’d like to see interchange fees come down too, but through market innovation and competition, not Congressional fiat.” We agree. That’s why we introduced the bipartisan Credit Card Fair Fee Act: It facilitates direct negotiations between merchants and the credit card industry on interchange fees.
This approach is necessary because of concerns about coordinated price fixing among issuers leading to less competition and higher rates. For example, Visa has increased the average interchange rate 17% (26 basis points) in recent years despite dramatically improved processing technology and rapidly rising card volume. As the Journal notes, “Economies of scale should be driving [interchange] fees down, as in most other service-fee industries.”
In fact, Americans pay nearly three times as much on average as Europeans in credit-card interchange fees for the same set of services — nearly 2% of every retail purchase. This amounts to nearly $36 billion imposed on consumers through higher retail prices. And the interchange fee is the largest credit-card fee of all — dwarfing credit-card late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, and even ATM bank fees.
Yet the editorial says the market will ride to the rescue and bring down excessive credit-card interchange fees. That is unlikely unless there are negotiations and proceedings as set forth in our legislation. In an economy in which, as the Journal notes, credit transactions are now king and cash has been dethroned, how can the vast majority of merchants turn down plastic from the two major credit-card companies, who control approximately 80% of the market?
We introduced the Credit Card Fair Fee Act to create an open and transparent environment that doesn’t exist today, one that will not only spur the major credit-card companies to negotiate fairly on interchange but also to provide the opening for lower-cost interchange credit-card brands. Our bill would lead to competitive market-based interchange rates and terms.
Rep. John Conyers (D., Mich.) Chairman
House Judiciary Committee
Rep. Chris Cannon (R., Utah) Ranking Member
House Judiciary Subcommittee on Commercial and Administrative Law
Washington
The magnifying attention to what we assert is illegal price-fixing by Visa, MasterCard and its member banks is gaining concentrated global attention.
After a recent Wall Street Journal commentary (Credit-Card Wars,” Review & Outlook, March 29) that was favorable to one of the publication’s largest advertising categories – financial services – we anticipated a monstrously loud examination from retailers and the public. Today it happened.
There were four letters published in Thursday’s WSJ “Letters to the Editor” section. Our guess is that many more did not make the cut either, including ours (see below). Then again, we already had one published on Jan 10th. See link. For an overview of today’s response and our letters, see below.
The European Union has found, again, that interchange fees charged by MasterCard to merchants are fixed at anticompetitive levels. Instead of recognizing that the nearly $40 billion annual hidden tax on merchants and consumers is based on illegal price-fixing, Joshua Peirez of MasterCard Worldwide hauls out the usual replies (“EU Killing of Interchange Fees Won’t Help Customers,” Letters, Dec. 28).
The fact is that consumers, the marketplace and technology, not interchange fees, are what force innovations within the electronic-payment network. The actual cost of an electronic payment is a tiny fraction of the total fees collected, yet Mr. Peirez suggests that “interchange fees are necessary to fairly share the cost of an electronic payment system.”
Merchants are unable to pay a fair price for using MasterCard’s (and Visa’s) payment network; we are all forced to submit to their market power and their member banks’ ability to collectively fix interchange fees at noncompetitive levels. MasterCard’s long history of anticompetitive price-fixing corrupts its understanding of Economics 101, where the marketplace controls competition, not a board of directors who stand accused of illegal price-fixing.
Mitch Goldstone
President and Chief Executive ScanMyPhotos.com Irvine, Calif.
(Mr. Goldstone is the lead plaintiff in merchant-interchange litigation against Visa, MasterCard and leading member banks.)
“Are Credit-Card Fees Fair, to Whom, and How Best to Set Them?” LETTERS/EXCERPT:
Interchange fees in the U.S. are far higher than those in other western countries. Unfortunately, a market solution is not currently possible because of the credit-card network rules that insulate interchange fees from market discipline. Some credit cards (those with lots of rewards points) cost merchants twice as much as others.
In a normal, free market, we would expect to see these cards priced differently. Credit-card networks, however, forbid merchants to charge more for credit cards than for other, cheaper payment methods, to charge different prices for different card brands or cards within a brand, to accept only certain cards within a brand, or to accept cards only at certain locations and for certain transactions.
Innovation and competition cannot push down interchange rates until the card networks’ artificial constraints on the market are banned.
Adam J. Levitin
Associate Professor of Law
Georgetown University Law Center
Washington
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Your editorial comes to the conclusion that soaring Visa and MasterCard “interchange” fees that cost merchants and consumers more than $35 billion each year are no big deal because “retailers have options to avoid the fees.”
You say merchants can offer a cash discount. In fact, Visa and MasterCard rules make it almost impossible for anyone but gas stations to post both cash and credit prices. And even if they didn’t, the card companies’ systems don’t tell the merchant how much interchange is being charged at the time of purchase, making it impossible to calculate how much of a discount to offer.
You also claim that large chains negotiate lower fees. There are lower-rate categories for a few large merchants based on dollar volume, but Visa and MasterCard refuse to negotiate these rates and impose them on a take-it-or-leave-it basis just as they do for smaller merchants.
Finally, with Visa and MasterCard controlling more than 80% of the market, the question of competition isn’t about other cards or PayPal. The issue is that the thousands of banks issuing Visa and MasterCard cards won’t compete to lower interchange rates. Instead, they have historically come together and agreed to all charge the same high fee for each specific type of card. As we have testified before the House and Senate Judiciary Committees, that is a blatant violation of federal antitrust law.
Visa/MasterCard rules effectively require that billions of dollars in interchange costs be passed along to consumers — a hidden credit-card fee of more than $350 a year — yet most families don’t even realize their pockets are being picked. During the shaky financial times you note, what better way to help the economy than to bring the greed of the card companies under control?
Tracy Mullin
President and CEO
National Retail Federation
Washington
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One important point to merchants that was not developed in the article: It is not the “basic” set of fees for accepting charge cards that many of us take issue with. What aggravates so many merchants and service providers is the fee surcharges that are unilaterally imposed upon merchants for accepting certain types of credit cards most often associated with the multitude of rewards programs so widely advertised.
How do the likes of Capital One so generously offer the merchandise, discounts, and cash back without losing money? They attach a surcharge to these cards over and above what the merchant expects to pay for accepting these credit cards. The merchant must pay the extra fee. Merchants have no control over the surcharge amount which they are charged, so the card issuers can be ever more generous to the card holder at the expense of the merchant.
Bill Gardella, Jr.
Norwalk, Conn.
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Credit-card fees are an ever growing expense for all retailers. Credit-card fraud is rampant. Consumers are now starting to default on their credit-card debt the same way they’ve defaulted on mortgages. Your argument that if it ain’t broke, don’t fix it, doesn’t hold here. Would you have said the same thing about subprime mortgages two years ago? Government should be monitoring this ever expensive and important industry.
Stuart Burke
Hopkinton, Mass.
Our prevous letter to the WSJ didn’t make the cut, but, here’s a copy in response to a WSJ article.
Dear Editor (drafted, Feb 29),There’s more to Eric Felten’s “the burden of gratuitous gratuities” (Weekend Journal, Feb 29) than just that flaunty tipping jar at Starbucks. Most consumers don’t know that when they use a credit or debit card to fund their daily fix of java, it adds to a very hefty tip for Visa, MasterCard and its thousands of member banks that make up their cartel. As Starbucks attunes away from its financial miscues, a giant cost savings would be to return to cash to save consumers from the merchant interchange fees. Each year, electronic payment interchange fees – including those micro-payments of a buck or two bestow nearly $40 billion in cash to the banks. These rich fees were once cost-based and designed for clearing those manual credit card imprinter carbon copy transactions on the Visa and MasterCard network. Today, the lack of competition (Visa and MasterCard own nearly 80% of the market) and the unbridled collusion forces the question: why are these obsolete fees still in force?
Technology and innovations enable instant, automated and efficient settlements that no longer warrant these tips to the banks
Today marks the third year since ScanMyPhotos.com launched WayTooHigh.com – The Credit Card Interchange Report. It is also about the time we received that infamous rate increase letter from Chase Paymentech which was sent to millions of merchants just like us.
Some rates have risen more than 300% in the past few years. The most recent rate “adjustment” letter arrived days ago, but does not identify the new fees until after they take effect. That sympathetic letter from our payment processing service announced a rate increase when cardholders had us process their affinity, frequent-flier signature cards; a quality causing retailers to effectively also be taken on a ride. That was the letter which led to The Wall Street Journal front-page Marketplace profile on our parent company [30 Minute Photos Etc.] and the beginning of our Federal class-action complaint against Visa, MasterCard and international major banks.
Changes have occured over the years. Merchant interchange rates have continued to ascend, while our traditional photographic film business wallowed due to the same technological shifts which made digital more practical. These are the efficiencies which also helped bring down many antiquated analog services. Next to film, the yellow page directories, fax machines and thousands of other businesses, the changing times also drew attention to the $40 billion annual merchant interchange debacle which didn’t budge.
But, unlike other businesses that were forced to change, the two giant credit card associations and their 80% market power kept trudging along. Today, film, phone books and other once shining business models are historic vestiges from an antiquated past. However, the electronic payment network, which today is super-fast, efficient and liberated from the days of manual credit card imprinters and carbon-copy receipts (that had to be mailed away for processing) remains.When you study the free interchange processing for checks, and international interchange rates that are a third and less the cost in the U.S., you quickly understand that Visa and MasterCard’s game – managed by thousands of member banks – is blemished. Their anti-competitive price-fixing is illegal and drawing international attention and loud shouts from Washington D.C.
While this website has been written in our voice, as a retailer who best understands the issues, we have also become the leading personality and fixture behind the interchange battle. And, it continues to gaining traction. Visa and MasterCard restructured their companies, but the issues and fees remain as do their potential liability.The mix of banks, public relations and legal firms which read our comments each day is shared with close scrutiny by Visa, MasterCard, and much more importantly by other business owners, governments and associations around the world. From giant multi-national conglomerates to “mom-and-pop” shopkeepers, we have been reporting, sharing commentary and observations with the world community which is also causing grief to Visa and MasterCard. WayTooHigh.com and the nearly fifty other class-actions suits after we filed the first are shining a knock-down message that time is running out on the cartel’s imposing might.
Many of you have been following the shift in our business too – from film to digital and our extraordinary international media coverage for the new super-fast photo scanning business model we pioneered. From multiple articles in The New York Times, The Wall Street Journal, USA Today and scores of other media coverage, the entrepreneurial passions at ScanMyPhotos.com was successful in making the leap from analog to digital. So, why hasn’t Visa and MasterCard also transitioned from an ancient , cost-based interchange fee structure to one that represents today’s technological realities?
In the late 1980’s technology evolved where transactions were processed electronically and paper records were not needed for most payment card transactions. Since that time, the costs of various components of credit card transaction processing (phone, data processing and Internet services have decreased significantly. These changes led to significant reductions in the costs of processing payment card transactions.
As class-representatives, on behalf of the millions of merchants with shared dedicated to eradicating supra-competitive interchange fees, we will continue to engage and call attention to this multi-billion dollar injustice.
Unfortunately, it wasn’t until after the drunken jubilation subsided that investors are beginning to understand what is at stake. We posted the Visa Inc. SEC filing and risk factors on Dec 22. Why was the media as negligent as investment advisers and underwriters in better not explaining the facts behind the largest IPO in our nation’s history?Was it greed, or the rush to get the deal done at all costs.Now that the party is over and that window of opportunity to complete the IPO is sealed, sobriety comes in a few weeks, when the billions in Federal Reserve loans are called.
Click here to read the Herb Greenberg WSJ article.
Excerpts:
“Investors generally overlook “risk factors,” as they are called. These can be found in all IPO prospectuses and 10-K annual reports filed with the Securities and Exchange Commission. This is where the company is supposed to bend over backwards to tell you where the booby traps might be.”
“Much of it is boilerplate, but Visa’s warnings go beyond mere boilerplate to some specific issues that could very well spook investors if and when they ever make it into the headlines. Consider, for example, that the first eight pages of its risk factors are devoted to legal and regulatory matters. Most companies usually start with business risks, but with Visa — and MasterCard — the lawyers (and some politicians) have had a field day. Perhaps the stickiest concern has to do with lawsuits, as Visa puts it, over the amount of money the credit-card companies charge merchants.”
Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.”
Click here to view the March 10th AdAge article by Matthew Creamer (Subscription required).
Excerpt:
“Debt: It’s the new obesity. Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”
“Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”
[Click here for March 19, AP story on Visa Inc. IPO by Michael Liedtke]
Based on Visa Inc’s. closing stock price after its first day of trading (down by more than 12-points from its intra-day trading high of $69 a share), the giant credit card association’s market value is about $45 billion. The stock was up just $1.50 a share from its trading-day low of fifty-five dollars. Even so, the credit card cartel’s valuation is still $5 billion shy of the reported $50 billion potential legal liability, according to Legal Times. As with MasterCard, the antitrust liability could lead to the company’s insolvency, according to Visa’s SEC filing.
While Visa might be somewhat insulated from credit problems facing the banks, which still own nearly half the company, they along with MasterCard are very much in the cross-hairs of the merchants who are forced to accept the card cartel’s dominant 80% market power.
Even as a new group of owners join the thousands of member banks by stepping onto the field, the years of antitrust price-fixing charges remains with the new and prior owners.
Because the new Visa Inc. shareholders remain hypnotised by the market success of MasterCard’s IPO, here are some leading morning-after profiles about why the banks bailed on Visa, cashed out $10 billion, plus another $3 billion for litigation reserves.
Visa is the richest IPO ever in U.S. history, but for who?
Did you know that the initial initial public offering was expected to yield only $5 billion? And, after deducting the legal reserves, the banks and the underwriters proceeds that is about all that might be left.
Non eco-friendly relics from last century, like photographic film and bulky Yellow Page directories, in our opinion, share something in common with Visa and MasterCard’s interchange fee structure.
Even worse, the billions of bank-mailed credit card solicitation junk-mail sent each year fill up land fills along with billions of plastic charge cards cast-away. Whether it is Interchange fees, photographic film or Yellow Page print directories, in our opinion, they are all obsolete in today’s high-tech society.
The difference is that consumers and businesses can quickly adopt. Most have switched from film too digital, and many are switching from print to Internet advertising [Click here for an overview of phone book giant R.H. Donnelley’s quandary]. The manufacturers adjusted too. Many directory listing companies are offering online solutions.
And, in our case, retailers like us modified the entire photo business model. Entrepreneurs are switching from print Yellow Page advertising to Google and other online directory listings. For ScanMyPhotos.com, we were forced to change, and fast. AT&T Real Yellow Pages “forgot” [they literally forget] to run one of our display ads last summer in Central Orange County, California. These are the legally contracted ads we place every year and were an essential marketing tool for us.Subsequently, in preparing for our new Blog: YellowPage the Dinosaur, we contacted several others in our industry and they share our opinion of the Yellow Page’s demise. [website: blog.yellowdinosaur.net].As the phone stopped ringing from local customers, we were fortunate that ScanMyPhotos.com also relies on national customers, our website and Blog: Tales from the World of Photo Scanning to spark traffic and new customers. For complete information on our quagmire see our new Blog: YellowPage the Dinosaur. Our Yellow Page story was just profiled in B to B Magazine, but we are still out the more than one-hundred thousand dollars from lost revenues . Even one of the online directory companies picked up on our predicament and has the ScanMyPhotos.com new customer profile on their site.What does this have to do with our interchange fee battle?
As technology and efficiencies caused oceanic-sized changes to the Yellow Pages and film businesses, Interchange fees continued to rise. Interchange fees were designed to be cost-based to cover the four-party payment network when we used those antiquated manual credit card imprinters and thick stack of carbon-copy receipts. Unlike with film and the Yellow Pages, merchants cannot easily switch to other electronic payment networks. The 80% market power exerted by Visa and MasterCard is insurmountable.
Like most merchants, doctors offices and millions of all-sized companies, we are forced to accept Visa and MasterCard – pay their non cost-based rates [$40 billion annually] and even their whimsical fee adjustments. Another fee adjustment was recently announced, but merchants won’t know the new rates until after the Visa IPO occurs and not until the day the new rates are imposed on April 1st – April Fool’s Day. These unchallenged and unfair fees are, after all, how we got started with our antitrust litigation in the first place. [Click here to read 2005 The Wall Street Journal article by Wendy Bounds and Robin Sidel]. Back in 2005, both Visa and MasterCard collectively and “coincidentally” were united in sharing the announcement that their signature affinity cardholder interchange fees were rising. This action caused merchants to also be taken on a ride when cardholders paid with their plastic frequent-flier cards. And, they are at it again, with a planned April 1 new rate adjustment.Whether it is film or yellow page directories, we modified our business model. But, when it comes to gallant, anti-competitive, cartel price-fixing, retailers are unable to modify our practices. Photographic film’s demise caused havoc on many business. The Yellow Page ad that AT&T forgot to run for us equally had a detrimental impact.However, with Interchange fees we, like millions of other merchants are all beholden to Visa and MasterCard. The day we stop accepting Visa and MasterCard is the day we are forced to close down, yet we are forced to pay whatever rates they impose.————————————————————————————-
If it isn’t delayed or cancelled, the Visa Inc. IPO won’t be the only record to be broken.
Today marks the highest – record-setting number of domestic and international visitors to WayTooHigh.com – The Credit Card Interchange Report since we launched this news and commentary site in 2005 to chronical our battle against Visa, MasterCard and its member banks’ anti-competitive merchant interchange fee price-fixing litigation.
Based on the dire financial news reports, stock market turmoil – from Bear Stearns to soaring gold and other commodity prices and non-stop Federal Reserve interventions, we are thinking that the Visa IPO will not happen this week, or any time in the near future.
Let’s see who will be right – us or the thousands of gleefully greedy banks hoping to bailout and transfer partial ownership on an already battered investment community.
From this weekend’s broad-base of WayTooHigh.com readers and the page-viewed areas of interest – specifically about our Visa IPO commentaries – we still think the public offering will be canned or minimally, delayed.
We guess Visa’s public reason will be due to “market conditions,” but we can’t imagine investors ponying up to own a piece of a company that, according to their SEC filing could become insolvent if our merchant antitrust litigation is successful.
Recent Postings of Interest
Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.”
DISCLAIMER – Just to be crystal clear, we are repeating our website disclaimer: This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked.
On the eve of Visa Inc’s bank bailout, we have this news: interchange rates are changing, but we have no clue what it will be until after the IPO is completed.
What other business can announce they will adjust their fees, but will not let you know its new rate schedule and how it will impact your wallet until the day it takes effect? No, not the petroleum industry. But, it does take a mirror-like cartel with unbridled market power to decree these types of changes.
Over the past years, MasterCard and Visa have both attempted to retool and convert from their bank-owned control by hiring an independent board of directors and restructuring to help respond to our antitrust assertions.
This, along with other measures were designed to soften the reality that both credit card associations run a monopolistic enterprise, where its card network fixes prices at supracompetitive levels. Even the letter we received from Chase Paymentech married MasterCard and Visa together to virtually make them indistinguishable from each other – they are so similar that the processing company didn’t need to send two separate letters, but, instead batched both announcements together as one.
It seems that all the good changes that Visa and MasterCard enacted to move forward were just window-dressing. The reality is all here in this letter.
On April 1st, the two credit card associations will press a button and unilaterally change several merchant interchange rates. As merchants, we will be kept in the dark until … April Fool’s Day!
We will not even know the new rates until we view our statement a month later, or visit the Visa and MasterCard websites, which require an advanced degree in gobbledygook to decipher.
We just received a letter from Chase Paymentech dated March 4th (today is March 14), that on April 1st, both MasterCard and Visa will be adjusting their merchant interchange fees and certain rates may increase. All we know now is certain merchant interchange rates will be “modified.”
This is the link that Chase Paymentech provided for Visa, but the new rates will not be posted until April 1, the day the new rates take effect.
As for MasterCard, try figuring out what this means from the link provided by Chase Paymentech.
The National Restaurant Association today applauded the Credit Card Fair Fee Act, legislation introduced last week by U.S. House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT). The bipartisan legislation will allow large and small businesses to negotiate directly with credit card companies in an effort to reduce the artificially high credit card interchange fees.
“Many of our members have expressed concern about the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies. The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, across the country,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association.
Interchange fees are meant to cover the cost of processing a credit card transaction and the risk taken by the issuing bank that it will be repaid. However, reports show that the cost of processing is steadily decreasing in the United States, while fees continue to rise. The result appears to be an increase in revenue for the card issuer and a drain on a business’s bottom lines. Interchange fees amount to approximately $2 of every $100 spent using credit cards.
Over the last three years, unfair credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve and Congress. Interchange fees have been the subject of hearings three times in recent years under both Republican and Democratic Congresses.
Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. The Credit Card Fair Fee Act is a direct outgrowth of the Antitrust Task Force’s bi-partisan examination into the fees, policies, and practices of the credit card industry.
The National Restaurant Association is a member of the Merchants Payments Coalition (MPC), a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit www.unfaircreditcardfees.com.
Click here to read the March 10th FW article by Carleen Hawn.
Abstract, key Ppints from the Financial Week article:
Investment banks may collect about $480 million in underwriting fees from the Visa IPO
J.P. Morgan Chase, Bank of America and Citigroup, are among Visa’s largest shareholders, and stand to gain hundreds of millions of dollars—$1.1 billion in J.P. Morgan’s case—from unloading large portions of their stakes.
Visa may have a different motivation for going public now, suggests antitrust litigator K. Craig Wildfang of the Minneapolis law firm Robins Kaplan Miller & Ciresi. “The purpose of Visa’s IPO is solely to try to get more lenient treatment from the courts under the antitrust laws,” he said. The timing of the offering, Mr. Wildfang believes, is part of Visa’s attempt to limit “its legal exposure to the Sherman Act.”
Civil suits based on the same argument followed from American Express and Discover. Visa settled with American Express for $2 billion, and Discover’s case is scheduled to go to trial in September, though a person familiar with the matter told Financial Week it is likely to “be settled before it ever reaches a courtroom—probably for an amount in the B’s.”
Visa plans to set aside $3 billion of its IPO proceeds to pay for “settlements of, or judgments in, covered litigation.” But $3 billion may not be enough, considering the other suits coming down the pike.
The most pressing may be the case being argued by Mr. Wildfang on behalf of a group of retail merchants who accept Visa credit cards as a form of payment.
Visa does not issue credit cards or lend money. That’s the job of its member banks, such as B of A, Wells Fargo and Wachovia. Instead, Visa processes the credit card transactions on its electronic payment network, in return for which it charges a host of fees that generated more than $5 billion in revenue for the fiscal year ended Sept. 30.
The claim in the “merchant litigation,” filed in 2005 in the U.S. District Court for the Eastern District of New York, is that Visa and MasterCard regularly meet to agree on the interchange fees each will charge its merchants. “That is price-fixing, and it is a violation of the Sherman Act,” Mr. Wildfang alleged. “In any other industry, that would be illegal.”
Going public may help Visa defend itself against the charge by convincing courts that it is a single entity. Under the Sherman Act, the “concerted activities” of groups, or “trusts,” are subject to greater scrutiny than the activities of “single actors.”
But there is a last wrinkle in this theory: Despite MasterCard’s IPO, the European Commission recently said in a ruling that it still regards MasterCard to be a group, not a single entity. If U.S. courts use the EU as any guide, Visa may not have much more luck in court after its own IPO.
Accredited media are invited to contact Mitch Goldstone, President & CEO of ScanMyPhotos.com, the lead plaintiff in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation against Visa, MasterCard and leading member banks of the two giant credit card associations.
For a detailed history and prospective on the interchange battle, issues pertaining to the Visa IPO and commentary on the new legislation introduced by the US House Judiciary Committee – to enable merchants to negotiate interchange fees – Mr. Goldstone is available to share his prospective.
Mr. Goldstone is an entrepreneurial expert who co-owns a nationwide Ecommerce and retail business based in California since 1990. He co-edits WayTooHigh.com – The Credit Card Interchange Report and leading, well-known personality in this multi-billion dollar merchant interchange battle.
To schedule an interview, accredited media may email: Goldstone (at) 30minphotos.com.
With millions of merchants, the fresh eyes of Washington, the European Union, nation’s around the world, and entrepreneurs like us, the question is: how can Visa, MasterCard and its member banks explain the annual $40,000,000,000 hidden tax that (we assert) is based on illegal price-fixing by agreement and unbridled collusion?
Even more questions about Visa’s IPO-planned multi-billion dollar bank bailout are raised from the March 7th Legal Times article by reporter Attilla Berry. Click here to view.
Even the gigantic-sized billable hours for law firms like Arnold & Porter pale in the shadow of the potential liability, which was reported to be “more than $50 billion if the merchants are successful,” according to the article.
Based on market conditions, partisan legislation aimed to reduce hidden credit card interchange fees, the recent recommendation challenging MasterCard’s reorganization and IPO, and our antitrust litigation [which according to Visa’s SEC filing could, if successful, lead to its insolvency], we wonder how the banks are going to attempt to spin this offering? Will the Visa IPO, which would be the largest in U.S. history, become known as the largest dud, non-event? Will the March 7th Legal Times article have traction?
WASHINGTON–The National Retail Federation today welcomed the introduction of landmark antitrust legislation that would address hidden MasterCard and Visa fees that cost merchants and their customers more than $40 billion a year.
“This legislation would use the nation’s antitrust laws to rein in the greed of the credit card companies,” NRF Senior Vice President Mallory Duncan said. “With the rapidly increasing use of plastic, credit card companies and their banks are seeing a windfall that is costing U.S. consumers tens of billions of dollars each year. These are fees that most consumers don’t even know they’re paying because Visa, MasterCard have tried to keep them secret. The introduction of this legislation marks the beginning of the end of credit card company rip-offs.”
“Rather than allowing these fees to continue to be set in secret and imposed on a take it or leave it basis, this legislation would require negotiations and allow retailers to seek fair terms and conditions that will ultimately mean a better deal for consumers,” Duncan said. “Consumers are already angry at the way they’ve been treated by credit card companies, and this bill is an important step toward making credit card companies treat both merchants and their customers with respect.”
The Credit Card Fair Fee Act was introduced today by House Judiciary Committee Chairman John Conyers, D-Mich. The bill is the first attempt by Congress to address credit card interchange fees, and is the outcome of a hearing held in July 2007 where Duncan, testifying on behalf of NRF and the Merchants Payments Coalition, argued that interchange practices violate federal antitrust law.
Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and 150 percent since 2001.
Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. But Visa and MasterCard effectively require merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to about $350 per household each year.
The Conyers bill would require credit card systems possessing “substantial market power” to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.
The arbitration proceedings would take place with a limited 60-day discovery period and other statutory deadlines, and the judges would be required to apply a market standard reflecting a perfectly competitive system where neither side had market power. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself. Both sides would receive limited immunity from antitrust laws in order to participate in the process.
The legislation requires that terms and conditions set under the process be available to any merchant regardless of size, industry or location. Individual merchants or groups of merchants would remain free to negotiate voluntary arrangements with credit card companies and their banks.
NRF is leading retailers’ fight against soaring interchange costs. During last summer’s testimony before the Judiciary Committee’s Antitrust Task Force, Duncan explained to lawmakers how Visa and its member banks come together to set interchange rates that all banks agree to charge regardless of which bank’s name is on a card. MasterCard follows a different procedure that also results in all its banks agreeing to charge the same. In either case, the two card associations each operate as illegal price-fixing cartels in violation of antitrust law, he said. With Visa and MasterCard together controlling at more than 80 percent of credit card purchase volume, retailers cannot afford to refuse the cards, he said.
The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com
“According to a group of prominent bankers, a lawsuit brought by retailers in the US alleging a number of major credit card issuers and banks colluded to fix processing prices will have far reaching consequences for the industry at large if it is successful…”
Click here to view the article in “Banking Business Review”
Is anyone else wondering why there is silence as the banks, Visa and MasterCard are celebrating extraordinary windfall profiteering at the pumps? Crude oil reached another record high – $105.97, which means even more profiteering.
Retailers also are hit with additional costs because of chargebacks, known as “Reason Code 96.” While retailers have not seen the specific rule (no retailer has seen the complete credit card operating rules that they are told to follow) they can be denied payment by the banks if they authorize a pay-at-the-pump transaction for more than $50 for Visa and more than $75 for MasterCard, even though the transaction is not challenged by the customer. As long as fuel prices remain high, “Reason Code 96” will substantially increase the cost of credit card acceptance.
MasterCard seeks to annul decision which would harm consumers and undermine European competitiveness and innovation
WATERLOO, Belgium, March 3 /PRNewswire-FirstCall/ — MasterCard Europe has applied to the European Court of First Instance to annul the European Commission’s decision on MasterCard Europe’s cross-border interchange fees, and said it believes it has strong grounds for its request. The December 19, 2007 decision requires the company, among other things, to repeal its intra- EEA fallback interchange fees by June 21st.
The company reaffirmed its intention to comply with the Commission’s Order while the appeal proceeds, as well as its commitment to ensuring that its payments services remain competitive and continue to benefit its customers as well as the millions of European cardholders and merchants who rely on MasterCard and Maestro cards.
MasterCard said its concerns with the decision focus on:
The Commission’s failure to recognize that four-party payment systems cannot operate without default settlement terms between banks that issue cards to consumers and those that acquire transactions for merchants, which requires the setting of an interchange fee;
The Commission’s refusal to recognize the efficiencies that four-party payment systems create and the fairness of MasterCard’s interchange fees; and
The Commission’s inaccurate conclusion that, despite MasterCard’s May 2006 IPO, MasterCard and its customers continue to be “an association of undertakings”, and its mischaracterization of MasterCard’s interchange fees as decisions of an association that restrict competition under EC Treaty rules.
“MasterCard firmly believes that market forces, not regulation, should drive key decisions such as the setting of interchange fees and retailers’ choices over which forms of payment to accept. If left unchallenged, and especially if followed by national regulators, the Commission’s decision would not only be bad news for consumers but a blow to the European payments industry,” commented Javier Perez, President of MasterCard Europe. Perez continued: “From a business point of view, a payment system that does not allow for efficient recovery of costs is not sustainable in the long term, nor is it desirable because it limits the scope for innovation in payment services offered to consumers. “The Single Euro(pean) Payments Area (SEPA) for payment cards, launched at the beginning of the year, will continue to require enormous investment and commitment by market players. It’s difficult to expect them to expand
into new markets when regulation lowers the incentive to take those risks. In our view, the best way to proceed for the payments industry and SEPA is to follow the established European public policy principle of relying on competition to deliver what consumers want.”
Click here to read the Sunday, March 2, article in The Charlotte Observer.
It included a listing of considerations before investing in the pending Visa IPO which was written by reporter Christina Rexrode, but was absent of a giant risk factor. Among the pros and cons, there was no mention of the merchant interchange litigation with threatens the continued operation of the giant credit card association, and as described in its SEC filing, might lead to insolvency.
Read the below 998 WayTooHigh.com posting for more reasons why this might not be the smartest of investments, other than for the thousands of banks which are racing to bail out.
We are troubled that at yesterday’s (Feb 28) Presidential news conference, Mr. Bush was surprised and unaware that Americans are paying nearly $4-a-gallon to fill up their cars.
Of equal concern is that if the President was surprised and unaware of what motorists are paying at the pumps, then he must also be in the dark on the nearly $40 billion siphoned out of our wallets each year by the banking cartel for merchant interchange fees for Visa and MasterCard’s electronic payment network.
But, now that he knows it, the next question is why are the banks able to force motorists using plastic at service stations to fork over a percent of each fill-up? These fees were designed to be cost-based, not to enrich thousands of banks who use these revenues to cover their billions in losses from misguided mortgage and other fiasco’s.
MasterCard had earlier announced a $50 cap at the pumps, but we are unsure if that ever took hold, and we are not sure if Visa followed along. Did they? And then two more questions:
Why are the banks still able to get upwards of 1.7% for each charge?
If the credit card associations can place a limit on interchange fees at the pumps, why not for all electronic payment transactions elsewhere, from Rolex watches to a latte at Starbucks?
It’s a record price at the pumps, which again raises the question: why are the banks allowed to reap windfall profits during our nation’s economic energy crisis?
As more motorists are forced to pay with plastic – due to the record costs to fill up their tanks, Visa, MasterCard and its thousands of member banks are earning windfall profits. They demand a percent of each sale for each credit card transaction, even though the interchange fee cost is nearly zero (it is estimated that the actual fees to process electronic payments are about 13% of the total interchange fees collected).
Click here to read the Carolyn Said, Feb 26th San Francisco Chronicle article about Visa’s planned IPO.
From the article, this is one of the reasons the annual $40 billion hidden tax on retailers and consumers should be close to zero. Today, most electronic payments are instant, cost-effective and high-tech, no more carbon-copy paper receipts that need to be manually cleared. Then again, think of check writing and even those processing fees are without interchange fees too. The banks will explain that limiting interchange fees in today’s modern world would be price-fixing, and they should be very familiar with that term, because that is what they are doing.
When Visa was established, the card association was without sophisticated, cost-effective computers. “card transactions were all processed on paper receipts from hand-swiped machines”.
“At one stage, there were literally gymnasiums full of unrecognized receipts people had to sort through, [i]t was an absolute nightmare.”
“Focusing on ‘digital money’ was the key to revolutionizing the card. But turning that into reality involved major negotiations.”
Click here to read the AP story on Visa’s planned ~$19 billion IPO.
click here to read Reuter’s story on the Visa Inc IPO
[WayTooHigh.com Editor’s note: Investor’s, drunken with jubilation over MasterCard’s valuation, would be wise to sober up and read the Risk Factors which Visa Inc explains could lead to insolvency of our merchant antitrust litigation prove successful. Forget not what MasterCard did in an attempt to transfer its legal liabilities from the banks to shareholders. The Visa IPO smacks of a giant shell game. The same banks which owned MasterCard, tested the waters with by selling off a chuck of the much smaller credit card association. Now, the same thousands of banks – facing billions in losses from other management missteps are now seeking to cash out again, and at a much higher level. Check back often for regular updates and commentaries on the planned Visa Inc. IPO].
With almost 1,000 posts since our battle against Visa and MasterCard began in 2005, we have a milestone to announce.
It is not just the multi-billion dollar interchange fees that are at record highs. Even gold and oil’s record highs today are not in a field of their own. WayTooHigh.com – The Credit Card Interchange Report also recorded its highest number of recent daily visits today. And, to think, we are not even a cartel – just entrepreneurs taking on the banks and Visa and MasterCard!
While we are heartened that the credit card associations, banks, their legal teams, advocacy groups and major media outlets are also regular readers of WayTooHigh.com, it is much more reaffirming that we are also visited each day by America’s largest multi-national conglomerates and small mom-and-pop stores.
Sunday’s Academy Awards telecast and MasterCard’s commercials will be a reminder that gimmicks and visibility do not trump the law and conviction of outrage by its cardholder and retailer customers. This Sunday, it’s the Academy Awards MasterCard commercials, then this Summer, during the Olympics, it will be Visa’s turn to spin their story.
During the 60-second MasterCard spots on Sunday’s Academy Awards, think of the single mom walking into a corner convenience store in the inner-city, rather than the planned MasterCard sweepstakes contest they will instead be promoting. Back to our profile: The mom walks in, buys a gallon of milk for cash and thus subsidizes the signature cardholder’s free trip to Europe from an identical purchase of milk because they paid with a premium signature MasterCard. The merchandise cost the same, but the interchange expense is shared by the cash paying shopper. Then, ask the question: why exactly is the person paying with cash subsidizing the frequent flier mileage gained from affinity cardholders? It would take an Academy Award performance to explain how that is a fair transaction.
Our readers are part of the reason we want to incite millions of merchants and consumers to stand up and say enough to the nearly $40 billion in hidden fees forced upon us by Visa, MasterCard and its member banks. There is no choice and there is no competition.
Excerpt: “Merchants are upset over fees they must pay to credit-card companies on each transaction, known as interchange fees. The fees average about 2 percent of the total transaction, but business credit cards and rewards cards — which give card holders frequent-flier miles or cash back — charge merchants more.”
Click here to read the Burlington Free Press article by Dan McLean (Feb 17)
[WayTooHigh.com editors note. Yes, MasterCard and Visa do make their interchange fees available on their websites. MasterCard’s is 100 pages. Instead, we challenge any merchant to identify the exact cost for each electronic payment transaction. Even though a schedule of fees is posted on a website, it doesn’t diminish from the reality that the fees are obscured and hidden. Ask any consumer or merchant what the exact interchange fee was for each transaction was – at the time of purchase – and they will be hard-pressed to guess at the number. Until we are successful in our litigation, the person from the lobbying group [Electronic Payments Coalition] can answer why the exact interchange fee is not posted as a separate item on each transaction, just like how other taxes are separated and displayed on its own line item on each receipt? Then again, the welcome page to Electronic Payments Coalition explains they are “preserving competition” and “protecting choice,” – and it’s not even April Fool’s Day yet. Competition? Visa and MasterCard control about 80% of the entire electronic payment market. Choice? If ScanMyPhotos.comwere to cease accepting Visa and MasterCard payments our retail and Ecommerce business, like most companies, would be closed in a day. There is no choice and no competition when it comes to the unbridled cartel-like power wielded by the member banks and their two giant credit card associations.]
Unlike Visa’s TV ad campaigns, encouraging consumers to use their credit cards, adding to the billions in electronic payment fees, even on micro-transactions, MasterCard’s upcoming Academy Awards® commercials are a pleasant change.
The prior sweepstakes’ schemes precluded debit card and PIN-based transactions from participating in the one-in-a-gazillion chance of winning a prize. That was a cheap attempt to coerce the much lower interchange rate debit card transactions to be entered at the much higher credit card rate.
This time, on Oscar® night, viewers will view a new MasterCard Worldwide promotion which is open to everyone – no purchase is necessary.Now, if only the two leading credit card associations would open their eyes to the growing battle against their anticompetitive and collusive price-fixing charges.
According to The New York Times reporter Stuart Elliott, the TV and print campaign, called “Studious Pupil” will reward customers with priceless experiences.Each spot “ends by asking, ‘[a]re you searching for the priceless things in life?’”
A better question is asking whether the millions of MasterCard cardholders understand that each electronic transaction they make is anything but “priceless?”
There is a cost. Merchant interchange fees account for nearly a $40 billion annual hidden tax on consumers and retailers. Rather than taunting viewers at the Oscars with a one-in-a-gazillion chance of winning a painting or free meal, a more picture-perfect blockbuster would be to end their cartel over what we assert are illegal price-fixing tactics.
Happy to note that JPMorgan Chase is a named defendant in our multi-billion dollar merchant antitrust interchange fee litigation. [They own the credit card processing service we use (Chase Paymentech)].
Our company, founded in 1990 services customers across the country and internationally. One thing we have nearly never experienced were chargebacks – when a cardholder disputes an electronic payment transaction.
In all the year’s we have had, maybe, a handful of chargeback requests and most are resolved in the same way. For instance, on January 14th, we had a Visa chargeback for $103.50 due to what the customer claimed was a “duplicate processing fee.” In actuality, the customer ordered photo scans and then a separate, nearly identical charge for online photo printing from their digital files.
On January 29th the issue was resolved in our favor and the reversal applied to our account, less a $10.00 fee. Chase Paymentech explained that we are still responsible for paying this processing fee from the chargeback.
This is another example of the bank-controlled credit card associations nickle-and-diming its customers. Shouldn’t these excessive fees be covered by the already “Way Too High” merchant interchange fees that millions of merchants like us pay, which accounts for nearly $40 billion in fees each year?
And to think: if our customers ever called us and questioned an unfair fee how we would handle it. Then again, we are not part of a giant cartel which stands accused of anti-competitive, illegal price-fixing.
WayTooHigh.com: The Credit Card Interchange Report, is edited by Mitch Goldstone, co-founder of California-based ScanMyPhotos.com, the international online photo preservation service.
Goldstone and co-owner, Carl Berman are also the lead plaintiffs and class representatives in a antitrust class-action litigation against Visa, MasterCard and major banks that was filed in 2005.
This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current. We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked. (c) 2010
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