Sen. Rand Paul and others finally get it right

[John Galt?]

http://www.nacsonline.com/NACS/News/Daily/Pages/ND0303111.aspx

U.S. Senator Plans Bill to Kill Swipe Fee Reform
Senator Rand Paul tells his credit union constituents that he is planning to introduce legislation that would repeal the Durbin swipe fee reform amendment.

“If we don’t get it [debit interchange] right, that credit union or community bank in your town isn’t going to be there and you will be left with larger institutions,” said Bachus, according to the Credit Union Times.

Rep. Debbie Wasserman Schultz (D-FL) told attendees that the biggest threat to credit unions is capping interchange fees. “The interchange train may have left the station but it's not too late to stop it in its tracks," she said, according to CUNA’s Twitter feed.

Wasserman Schultz clearly stated her position on interchange fees, noting that the current rules are deeply flawed and must be fixed. However, she claimed that merchants would still charge the same prices for goods, while pocketing the savings from interchange reform.

Others members of Congress weighed in on interchange yesterday, including Rep. Ed Royce (R-CA), who said interchange should not have been added to Dodd-Frank act, and Rep. Steve Stivers (R-OH), who said the Federal Reserve’s interchange proposal “wasn’t done right,” and that he supports stopping implementation and studying the impact on credit unions....


...According to CUNA, Senator Rand Paul (R-KY) told constituents that he was introducing legislation to repeal Durbin. Senator John Tester (D-MT) has made similar comments this week.

What a refreshing concept-that we should study all the effects of a bill BEFORE voting on it. Something Durbin, Frank, and Dodd never considered.

[dbucfan]

Study a bill - not take the advice of lobbyists?  Really?  Not follow the dictates of a political party gone made?  Are you sure JG?  What will the Unions say? 

[shawn731]

 Question-How come there isnt protesting or the request of removal of these individuals?  How come they are not treated like everyday regular joes?  If I didn’t read something before I signing I would be held accountable, but these "politicians" get the pass. 

This is what’s wrong with our country that no one pays attention to.  Everyone jumps on the issues that the media and particular individuals want you to pay attention to, but you have many in office committing acts like what’s described above and no one holds them accountable.  And save the point that they will not be re-elected come next election, because that’s becoming a tired song and dance.

[The White Tiger]

Question-How come there isnt protesting or the request of removal of these individuals?  How come they are not treated like everyday regular joes?  If I didn’t read something before I signing I would be held accountable, but these "politicians" get the pass. 

This is what’s wrong with our country that no one pays attention to.  Everyone jumps on the issues that the media and particular individuals want you to pay attention to, but you have many in office committing acts like what’s described above and no one holds them accountable.  And save the point that they will not be re-elected come next election, because that’s becoming a tired song and dance.

You also have many in the media who are pushing an agenda that is opposite the will of the people. Case in point - while Ron Paul is fighting "Swipe Fee Reform" - this article from Pennsylvania was basically a puff piece in support of the Swipe Fee Reform.

http://www.timesleader.com/news/Area_retailers_seeking__lsquo_swipe_fee_rsquo__reform_06-16-2010.html

America is coming to the realization that MOST of the media is not independent. Many of them were tied to investment firms, these firms received federal bailout monies, which in turn seems to place them in the odd position of needing to bite the hand they know feeds them - but because advertising dollars aren't supporting the views of the state-sponsored main stream media - they are left to decide if they should die a slow death, or a quick one.

In the market place of ideals - the left has been losing. Instead of learning this lesson, they turn to an unpopular, left-leaning, government, who increasingly proposes and supports legislation contrary to the will of the people - perfers and supports anarchy in place of dictators - in some places, while suporting dictators over popular democratic movements in others.

It appears MOST of the media outlets have decided slow death...death-by-handout. It is an odd event to stand back and watch the self-immolation of free men for the sake of security. They offer up their rights and freedoms for the limited opportunity to become the moutpieces of a regime...it is as if they do not remember that once the power is consolidated, the limited speech requires limited distribution.

Reasoned thinking folks must proactively find their own sources - and they should take note when the unpopular regime targets one source of news distribution. I tend to take note of what news that media outlet is distributing.

[bradentonian]

Most small businesses and associations that I am familiar with are very pleased with swipe fee reform

[John Galt?]

Most small businesses and associations that I am familiar with are very pleased with swipe fee reform

Probably because they don't understand it.

And the Bill isn't about "swipe fee reform" it is about "capping Interchange rates at a ridiculously low level". The Fed is proposing a $0.12/trans cap on debit card (no limit on CCs) network fees. Small businesses don't pay the network fees, the processors do. If IC on debit is lowered to $0.12, most small businesses won't see a dime of savings. Walmart and Best Buy will see a HUGE savings because the deal direct with process platforms and negotiate 5-10 year deals at IC+ $.01-.$.02. Unless the business is on a ICPT contract their rates won't change.                                                                                                                                                                     

The problem with this bill is that 2 years ago, BHO signed the Credit Card Reform Act that included a provision that required all the banks, processors and networks to put in Millions of dollars of security and triple digital encryption so to cover those costs the networks raised the IC. Now the Congress wants to limit how much you can charge to use the networks while still requiring enormous levels of security and encryption.

Capping debit IC at a reasonable level isn't that bad, but $0.12 is WAAAAY below costs let alone allowing a reasonable profit. It is also unfair to the smaller banks and credit unions that don't have Billions in other revenue sources to spread the costs around to. It will just make BoA, Chase, and WF bigger and badder will driving the local bank out of competition.

[bradentonian]

Capping debit IC at a reasonable level isn't that bad, but $0.12 is WAAAAY below costs

What is the cost of a debit transaction?

[John Galt?]

Capping debit IC at a reasonable level isn't that bad, but $0.12 is WAAAAY below costs

What is the cost of a debit transaction?

             

There is no single cost. There are 11 different networks for pin based debit, each one a different size doing a different amount of volume. And the debit card issuing banks all have different costs. Chase going thru Interlink is different than Chase going thru Star and Suncoast Credit union going thru interlink is different than any of those as is SCCU going thru Shazaam.

On top of that, the volume of transactions each network and each issuing bank handles per month changes as the economy changes. The Cost of a transaction in December is going to be less than the cost during a slow month.

And on top of that, there are different risk levels for different types of merchants. Gas, electronics, and jewelry are far more likely to get stolen debit cards than a utility or a non-profit org. Restaurants are notorious for chargebacks (servers changing the tips), but grocery stores rarely have chargebacks.

BoA said their cost per trans is about $0.43 but that would be an average cost IF you believe BoA. But that doesn't include the networks costs which is paid by the acquiring bank (the bank the processors use to aggregate all the transactions before forwarding them to the merchant), not the issuing bank.

To throw my best guess out there, the lowest IC debit rate is Pulse and AFFN (tier 1) Supermarket rate which is $0.28/trans and is only available to Tier 1 (merchants doing over $3.0 billion/yr and 46.5 million trans/yr). So I'd guess they have about 3-4 cents profit in there.


The Fed came up with the $0.12 number based on the cost to clear a check. Their (stated) reasoning was Debit transactions should clear at the same cost as checks since both come out of the same account. Which is stupid, since checks don't have fraud protection nor electronic encryption protocols nor massive nationwide computer networks to support nor provide next day funding. Also, check clearing is administered by the Fed (a non-profit quasi-government org.) while debit card processing is handled by for profit businesses.

My big gripe is that for Congress and the FED to tell for-profit businesses that they can only charge COST (cost according to their flawed calculations) is just down right UnAmerican.

[spartan]

My big gripe is that for Congress and the FED to tell for-profit businesses that they can only charge COST (cost according to their flawed calculations) is just down right UnAmerican.

No John, it's downright stupid. Give me one reason why I should start or run a business that is only allowed to operate by law, at cost.

[John Galt?]

My big gripe is that for Congress and the FED to tell for-profit businesses that they can only charge COST (cost according to their flawed calculations) is just down right UnAmerican.

No John, it's downright stupid. Give me one reason why I should start or run a business that is only allowed to operate by law, at cost.

unfortunately, Congress and Stupid are synonymous

[dbucfan]

Almost as dumb as enabling banking institutions to get so large the government/people have to bail them out when they screw up big time - supporting idiotic policies brought to us by the very same government.

[The White Tiger]

or a government that would force it's citizens to buy health insurance under penalty of law.

Hey...wait...this is the same government we're all talking about here....

[dbucfan]

The out of control government of the United States of America - yea - that is the one.

[bradentonian]

Capping debit IC at a reasonable level isn't that bad, but $0.12 is WAAAAY below costs

What is the cost of a debit transaction?

             

There is no single cost. There are 11 different networks for pin based debit, each one a different size doing a different amount of volume. And the debit card issuing banks all have different costs. Chase going thru Interlink is different than Chase going thru Star and Suncoast Credit union going thru interlink is different than any of those as is SCCU going thru Shazaam.

On top of that, the volume of transactions each network and each issuing bank handles per month changes as the economy changes. The Cost of a transaction in December is going to be less than the cost during a slow month.

And on top of that, there are different risk levels for different types of merchants. Gas, electronics, and jewelry are far more likely to get stolen debit cards than a utility or a non-profit org. Restaurants are notorious for chargebacks (servers changing the tips), but grocery stores rarely have chargebacks.

BoA said their cost per trans is about $0.43 but that would be an average cost IF you believe BoA. But that doesn't include the networks costs which is paid by the acquiring bank (the bank the processors use to aggregate all the transactions before forwarding them to the merchant), not the issuing bank.

To throw my best guess out there, the lowest IC debit rate is Pulse and AFFN (tier 1) Supermarket rate which is $0.28/trans and is only available to Tier 1 (merchants doing over $3.0 billion/yr and 46.5 million trans/yr). So I'd guess they have about 3-4 cents profit in there.


The Fed came up with the $0.12 number based on the cost to clear a check. Their (stated) reasoning was Debit transactions should clear at the same cost as checks since both come out of the same account. Which is stupid, since checks don't have fraud protection nor electronic encryption protocols nor massive nationwide computer networks to support nor provide next day funding. Also, check clearing is administered by the Fed (a non-profit quasi-government org.) while debit card processing is handled by for profit businesses.

My big gripe is that for Congress and the FED to tell for-profit businesses that they can only charge COST (cost according to their flawed calculations) is just down right UnAmerican.

One of the networks was already charging a max of $0.12 before the legislation.  The reason the debit transaction is considered closer to a check than credit is that they don't have to bear the risk since funds are verified.  Also note that most local banks and credit unions will be exempt from this part of the reform because the limit only applies to institutions with over $10Bn of assets.

[John Galt?]

One of the networks was already charging a max of $0.12 before the legislation. 

Gotta call bovine feces on that one. Which network??


The max is in the far right column
https://www.nationwidepaymentsolutions.com/docs/PIN-based_Interchange_Rate_Fee_Schedule.pdf

The reason the debit transaction is considered closer to a check than credit is that they don't have to bear the risk since funds are verified.

HUH? What about the MILLIONS of dollars in computers, networks, IT personnel, security, encryption, PCI compliance, card encoding equipment, etc. etc. that checks DON"T have.

And debit card transactions get charged back ALL THE FRIGGIN TIME.  If your debit card is stolen, you have ZERO liability-the bank has to eat that.

  Also note that most local banks and credit unions will be exempt from this part of the reform because the limit only applies to institutions with over $10Bn of assets.

How the heck are they gonna do that?? The Banks don't set the IC, the networks and V/MC do. Are they going to have to come out with 4000 different IC schedules, one for the big boys, and 3999 to cover all the different exempt banks??