Large banking interests create a Web page against interchange finreg
By Mike Konczal
You want to know how I can tell that the interchange reform in the Senate bill was a surprise story? Because the last-minute lobbying campaign against it is so obviously a thrown-together, half-baked effort by the biggest banks.
Here comes the CARD Alliance, a proud project of The Electronic Payment Coalition. Their members include Visa, MasterCard, Bank of America, JP Morgan Chase, U.S. Bank, Citi and every banking association. Couldn’t they have at least tried to cover their tracks?
Because here's the funny part: You have to suddenly believe that all these firms are suddenly very concerned about consumers paying fees. Did you catch that? Visa and the major banks are worried that you may have to pay a fee!
Even better: "If interchange revenue were artificially limited by the government, the millions of consumers who use small financial institutions would be forced to turn to large, national banks for
their debit cards — further consolidating the financial system."
Actually no, it exempts small financial institutions with less than
$10 billion from the reasonable debit fee requirement. But read that again: Citi, JP Morgan, and Bank of America are terrified about financial sector consolidation. Where were you guys on the SAFE Banking Act debate?!?
CARD stands for Consumers Against Retail Discrimination. The discrimination charges are groundless, as Durbin wrote in news release on the interchange amendment:
In no way does my amendment authorize merchants to differentiate between cards on the basis of the bank that issued the card. In fact, Visa and MasterCard both currently have “honor all cards” policies which require merchants to accept any Visa or MasterCard presented to them regardless of the issuing bank. My amendment leaves these “honor all cards” policies intact. It is neither the intent nor the effect of my amendment to “encourage big retailers to enter into sweetheart acceptance deals that discriminate against community bank and credit union cardholders,” as you stated in your May 12 letter.
Here comes what they are most worried about: "Retailers could set unrestricted minimum or maximum amounts to use a debit or credit card — and, not have to alert the consumer to their policy until the very last minute."
Last minute, really? Every place that currently does that off the books alerts me right on the register, and I feel fine. But if you think that retailers set minimums because they want to subject you to serfdom, here is some real truth from Jinger Duryea, president of CN Brown, which owns Big Apple convenience stores across Maine:
“Credit cards are the lifeline of my business as customers use plastic for everything from; a cup of coffee, to a pack of gum, to a tank of gasoline. Credit cards and debit cards are easy to use, but what customers don’t know is that every time they use a credit card, I pay a fee. For example, a customer purchases a local newspaper (75 cents retail), my profit is 9 cents. If the customer is using a debit card I would pay 25 cents for the transaction fee plus .08% interchange fee. If the customer puts down a Visa credit card the transaction fee would be 19 cents plus 1.68% interchange fee. Regardless of the payment option I lose money on the sale.”
Think about that. I have money. The convenience store has a product I want to buy. I want to use my debit card to pay. Debit cards are all that this law impacts, which involves nothing in terms of the risks of a short-term unsecured loan from a credit card. It's just moving my money from Place A to Place B. And if I use my debit card for this purchase the store will lose money, and if they try to stop that they could be punished by Visa and Mastercard. How awful is that? They, this small business, has to take a bath on selling me something I want to buy and they want to sell or they cannot accept any form of credit or debit cards.
That's how this works currently, and that's what the law wants to change. Part of this law gives them a legal option in setting a minimum. Many places have off the books minimums that you've probably already seen -- hopefully that quote above gives you a sense why.
Capitalism is about empowering people and businesses with choices and options, and giving businesses choices over their payment mechanism is the whole point of this amendment. A little bit of price transparency, competition between paying options and a little bit of actual decision-making by someone other than a duopoly can do wonders in creating an actual market mechanism.
Make sure you know the facts of this very market-friendly way of trying to regulate this duopoly before you make a judgment on whether or not to support it.
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