Banks Revise Overdraft Fees, Why Not Interchange Fees Too?

Ron Lieber wrote in The New York Times that JPMorgan Chase and Bank of America have overhauled their debit card overdraft fees.

Read article (9/23).

This has been a multi-billion dollar annual boondoggle for the banks at the expense of millions of consumers.  The larger question is why haven’t the banks also addressed merchant interchange fees – which account for substantially more unfair costs to businesses and consumers? 

It was the public outcry, an NBC Nightly News segment and extensive media coverage on debit card overdraft fees that helped cause this very rapid shift in policy.  It is also being used as a marketing tool, as the credit card issuers can now promote they have waived and adjusted the terms of these overdraft fees to better compete.  However, there is no competition when it comes to merchant interchange fees; retailers are still forced to accept Visa and MasterCard’s terms.  Issuing banks can simply pass along any lost overdraft fees with higher merchant interchange fees, which simply means that ultimately the consumer still gets screwed.

My five-year legal battle as class-representative in an antitrust class-action against Visa, MasterCard and its member banks continues to reap unsubstantiated profits for the credit card companies with even greater costs. 

Merchant interchange fees are an insult that is an atrocity and slap in the face of every consumer and merchant that accepts debit and credit cards.   Along with the banks, which until Visa and MasterCard’s IPO’s controlled one-hundred percent of the two giant credit card associations, are continuing to wage a battle against its customers. If only they listened to their critics addressing these equally excessive charges.

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

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

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

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

Read more.

[source: NY Times]

“Banks Face ‘Systemic Margin Call,’ $325 Billion Hit: JPM” (Reuters)

Click here to read the Reuters article by Eric Beech.

Chase Paymentech Chargeback Fees Are Unfair

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.