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This spring, U.S. Representatives Peter Welch (D-VT) and Bill Shuster (R-PA), introduced HR 2382, the Credit Card Interchange Fees Act of 2009.  Welch, the bill’s author, states that “credit card fees are killing small businesses.”  The act, targeted to help small retailers, would limit the fees charged to merchants.  It would also prohibit charging higher fees to merchants when customers use reward cards and would give the Federal Trade Commission the right to review interchange fees. Continue reading "Interchange Fee Legislation – Who Will Pay The Price?"

The Payment Card Industry Security Standards Council is always creating new and effective versions of PCI DSS. The most recent of such compliance standards is version 1.2 which has 12 requirements for enhancing payment account security. These requirements are designed to address a broad range of data security, from software design to policies and procedures. Version 1.2 is not intended to change the existing DSS, but only to provide added security in a time when many feel it is most needed.

There are two notable changes, one requires that off-site data storage locations be visited and validated as compliant with PCI DSS. The other imposes a sunset date on wired equivalency privacy (WEP) use. For those of us who don’t speak techie, WEP is a software application intended to protect data as it travels across wireless networks. In previous posts, I have talked about WEP having to be upgraded by June 30^th, 2010 to Wi-Fi protected access (WPA).

Here are the 12 core requirements as outlined by the card associations:

Continue reading "The Payment Card Industry Security Standard Dozen"

As if there is not enough controversy over Interchange Rates charged to merchants, we now have to deal with consumer credit card interest rates increasing drastically without notice. Some consumer spending experts say this may hinder spending even more this holiday season. What is our government doing to fix the issue?

Federal regulators jumped into action and passed laws to protect consumers from increased interest rates on existing account balances. Government rules seem to run at a snail’s pace as these laws will not take effect until July 1^st 2010; that’s a lot of money in the banks’ pockets in the interim. Millions of card holders will get raked over the coals, paying high fees on previously made purchases until these laws kick in.

Credit card companies will still be able to raise rates on new credit cards, future purchases or cash advances. Finally, the Federal Reserve and National Credit Union Administration are cracking down on arbitrary hikes in interest rates. It would seem that we  have learned a lot from subprime lending. These rules will also stop the issuing of credit cards to people that all ready have a large amount of debt, and who were previously getting approved by banks for high interest rate cards.

Some of the new rules include:

Continue reading "Rate Gauging on Consumer Credit Cards Gets the Boot"

It seems as though anytime a company gets large enough, there will always be people who feel it is unfair and begin to wage war on what they don’t know. I have talked about Visa and MasterCard having to pay large settlements to Discover after a long anti-trust battle. Although Visa lost that battle, the war on card associations is still ongoing.

Overseas, many organizations have formed campaigns against Visa and MasterCard. In Canada, ad campaigns are being run by The Retail Council of Canada telling Visa and MasterCard to “stop sticking it to retailers.” The Retail Council of Canada is a non-profit association that represents more than 40,000 stores of all retail formats.

Continue reading "Card Association Battles Around the Globe"

In previous posts I have written about HR 5546 which will allow merchants to negotiate their Interchange Rates directly with Visa and MasterCard. As I have been following the developments, it seems as if the National Retail Federation is making the card processing companies out to be deceitful. In many articles the NRF has referred to Interchange fees as “hidden costs,” and also as being the cause of consumers paying more for goods. Interchange is public record.

HR 5546 is also known as the Credit Card Fair Fee Act of 2008. This bill would require Visa and MasterCard to negotiate with merchants and reach an agreement on credit card terms and conditions. If an agreement is not reached, both sides will be required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

Before a bill is passed it has to go through several phases:

Continue reading "Will Merchants Be Able To Negotiate Interchange?"

Although Red Flag Rules were created to protect against identity theft, are some types of businesses more affected then others? In previous blogs I wrote about how merchants are not getting a fair shake when it comes to these rules, and many law suits have been filed against merchants. Different industries face government fines because they say some of the rules are difficult to follow.

For example, car dealerships fear they will not be able to comply. Since car dealers extend auto financing, they are considered creditors. Dealerships argue that it is very difficult to detect suspicious or unusual activity, and most of their staff is not trained to look for these types of things. According to Andrew Koblenz, the National Automobile Dealers Association’s general counsel, “We want to fight identity theft, and dealers have a tremendous self-interest in not selling a car to an identity thief, but the real world impact is that it would burden dealers.” Auto dealers speculate it could add as much as five hours to the loan application process.

The healthcare industry also falls into the category of creditor. If a hospital offers payment plans so patients can pay in installments, the hospital would be considered a creditor as well. Non-profit organizations and government entities that defer payment for goods or services are also considered a creditor. For the healthcare industry, the Federal Trade Commission is responsible for interpreting and enforcing the Red Flag Rules.

Continue reading "The Red Flag Deadline is Approaching"

FACTA (Fair and Accurate Credit Transactions Act of 2003) allows consumers to be able to obtain a free credit report once every twelve months from each credit reporting agency. More importantly, the act was created to help reduce identity theft. With the state of our current economy, credit card and identity theft is on the rise. This is affecting not only consumers but merchants alike.

On November 1^st 2008 FACTA has a deadline in place called the Identity Theft Red Flags Rule. Red Flags are indicators of a possible risk of identity theft. Red Flag rules listed in Section 114 of FACTA explains each rule and how to develop ID theft prevention programs. These rules apply to any business, bank, or issuer that offers credit or any type of finance option. Many financial institutions are not taking the deadline seriously since the first Office of Thrift Supervision audits will not occur until February of 2009. Merchants all together have become savvier and typically try to comply and report any red flags, but some may not know who to report these red flags to.

Although we all want our credit card information to be secure, it seems that merchants are not getting a fair shake when it comes to FACTA. Many class action lawsuits have been filed against a number of retailers. Recently, there was a class action law suit filed seeking willful damages based on printing of credit card expiration dates on receipts. The merchant was seeking $100 to $1000 for each violation. This applies to both paper and electronic receipts. Most mom and pop merchants would expect that their card processor would ensure that they are up to code. This is not always the case. Merchants should review the FACTA rules regardless of their size. The Supreme Court is currently reviewing willfulness and “reckless disregard” and expects to have a decision this quarter. 

In recent news, Discover Financial Services has been going round and round in a lawsuit with Visa Inc. and MasterCard Inc. Discover claims restrictions were placed by Visa and MasterCard – the world’s two largest card companies – on banks to stifle competition and violate antitrust laws. Visa and MasterCard argue that Discover simply has not been able to close partnerships with banks because of the smaller fees that are made on their cards. But this is just one of many recent complaints about Visa’s and MasterCard’s practices.

Visa and MasterCard are under the gun in Congress as well, for price-fixing and price gauging practices. The Credit Card Fair Fee Act (HR 5546/S 3086) stops the price fixing by Visa and MasterCard by insisting upon the use of a transparent market-based process. Some may say these are anti competitive practices, while others speculate that regulation is necessary.

Continue reading "Are Visa And MasterCard Going Too Far?"

For years the government has taken a Laissez Faire approach to Interchange Rates, but recently the U.S House Judiciary Committee has begun heavily campaigning to control them. Proposed legislation (HR 5546 The Credit Card Fair Fee Act) would require Visa and MasterCard to negotiate Interchange fees directly with merchants. This would put a stop to a credit card processing company’s ability to set non negotiable fees. If the merchant and the credit card company are not able to come to terms, then they would have to submit their final offers to binding arbitration by a three judge panel.

If this new bill is passed by Congress, it is could potentially create more of a mess and ultimately higher costs. I am sure there are millions of businesses in the U.S alone, and if it passes, Visa and MasterCard are going to be getting a lot of calls from people looking to negotiate their fees. This means they will have to hire more staff to take the calls, and possibly even create systems to track all the various negotiated rates. So will this bill help the situation, or only put a band aid on what merchants believe to be an issue? Fees collected generally go to rewards programs, credit losses, and operating costs.

There are a total of 23 Bills regulating the card processing industry; some of the key ones are as follows:

Continue reading "Should The Government Be Involved In Interchange Legislation?"

Over a month ago, on June 5, 2008, Senator Dick Durbin (D-IL) introduced legislation aimed at helping merchants with the rising costs of interchange fees. His bill is S. 3086 Credit Card Fair Fee Act of 2008. But, did you know that another bill with the same title was introduced by House Representatives John Conyers (D-MI) and Chris Cannon (R-UT) on March 6th of this year as H.R. 5546? Why are both the House and the Senate pursuing these bills?

Without sounding too obvious, the current credit crunch many are facing particularly affects merchants who are dealing with the rising cost of goods and services. The latter includes interchange fees. The two bills in Congress address the need for merchants to be able to negotiate the interchange fees they pay to credit card companies. Some of the debate in Congress calls interchange fees “hidden fees” that must be brought out into public focus.

While Congress is in summer session, I want to begin a series that will:

1. Shed light on what interchange fees are,
2. Talk about the history of these fees, and
3. Follow these two bills through the legislative process.

Do you understand what interchange fees are and how they affect not only you as merchants but your customers as well? As I begin this series, I want to hear from you about interchange fees. What questions can I answer for you?

Drop us a line. We look forward to hearing from you.