US Should Follow EU’s Lead in Swipe Fee Reform

The European Union is leading the way when it comes to reining in excessively inflated credit card “swipe” fees.  In a recent op-ed published in The Hill, Lyle Beckwith, senior vice president of Government Relations with the National Association of Convenience Stores, outlines how European Union regulators and Parliament is successfully transforming these fees and is in the process of securing protection for both their retail economies and consumers.
The U.S. needs to take a page out of their book.
 
For far too long, Visa and MasterCard have centrally fixed the fees that their banks charge, costing people worldwide billions of dollars.  By approving a 0.3-percent cap on the fees and a seven-Euro cents cap on debit card transactions, or 0.2 percent of the transaction value, whichever is lower, the E.U. locked in a rate that is a seventh of what U.S. retailers currently pay their banks.
 
Merchants and consumers in the U.S. pay the highest swipe fees in the world—up to 4 percent per transaction.  So, for every $100 worth of groceries, gasoline, or nights out on the town, merchants are forced to absorb another $4 despite the fact that it only costs the banks mere pennies to process the transaction.
 
Much to the banks’ chagrin, study after study continues to show how debit-card swipe reform here in the U.S. has given a much-needed boost to merchants and consumers.  In fact, noted economist Robert Shapiro estimates that consumers saved nearly $6 billion in the first year of reform and that those savings went on to support over 37,000 jobs.
 
Our counterparts in the EU, Australia and Canada are all finding ways to keep these escalating fees in check.  It’s time for us to follow their lead and pave a path that opens the way to a transparent and competitive market.

Europe Leads by Example in Fight Against Credit-Card Bullies

We Americans are justly proud of our free market economy, and yet it is the European Union that is taking the lead in breaking the grip of two big credit-card companies on the market and protecting consumers from abusive and unfair card payment fees.

Last week European lawmakers voted to impose lower caps on the “swipe” fees merchants pay every time a customer buys with a credit or debit card. The limit of 0.3% for credit and 0.2% for debit purchases will save businesses billions of dollars and allow merchants to pass the savings onto their customers.

Meanwhile, U.S. consumers pay the highest fees in the world. Up to $4 on every $100 charged to a card goes to banks. Swipe fees are so high because they are set in secret by Visa and MasterCard, which control 80% of the card business, leaving no room for negotiation.

Uncompetitive and unjustly high rates hinder our economy. Will the U.S learn from Europe's example and stand up against the bullies who are pocketing what could be consumers’ savings one swipe at a time on everything they buy with a card?

European Retailers Score Big Victory in Swipe Fee Battle

The E.U. continues to set the pace for swipe fee reform as the economic and monetary affairs committee of the European Parliament voted last week to cap the fees at 0.2% and 0.3% for debit cards and credit cards respectively.  The new legislation, which applies to domestic and cross-border payments, was a response to the ongoing impact of the fees on both merchants and consumers as well as the lack of transparency in how such fees are set.

Right now, the average swipe fee ranges from 0.2 percent in Denmark and the Netherlands, to more than one percent in Germany, Hungary and Poland.  The reform measures aims to standardize the governing rules between countries.

The European Commission states that the reduced fees could end up saving retailers six billion euros a year, a savings that could lead to lower consumer prices.

Despite the significant progress being made in Europe, the cost for U.S. consumers to swipe their cards remains exorbitant.  In fact, the fees, which can be as much as four percent of the total cost of the purchase, are eight times higher here than in Europe and other countries.

So, the question remains: what gives?  It’s time for our federal officials to follow the E.U.’s lead.

For more about the European Parliament’s recent vote, see here and here and here.

Image source: The Travelers Blog

A Unified Front: Retailers and Banks Join Forces Against Cyber Threats

As the fallout from the massive data breaches suffered by Target and others continues to play out, retailers and banks decided last week that it was time to band together to fight the ongoing cyber threats. Fifteen trade groups including the Retail Industry Leaders Association, the American Bankers Association and the National Restaurant Association put together a working group that will, among other issues, examine the latest payment technologies to identify which would have the greatest chance of thwarting future breaches and determine opportunities for potential action from Congress.

In a recent article in The Hill, Tim Pawlenty, chief executive of the Financial Services Roundtable and former Minnesota governor, described the current situation and unlikely union:

“…you can’t really make it better or improve it unless you look at it comprehensively. That involves a whole series of stakeholders, and we need to work together constructively to improve it. And this partnership is designed to try to bring people together to focus on the things we can agree on.”

The article points to one possible starting point for consensus and that is with the way in which companies notify customers of a data breach. Currently, dozens of states have varying laws that run the gamut but there is no uniform standard defining the protocol companies should follow. With so many cooks in the proverbial kitchen, the rollout of such notification is often disorganized and ineffective.

To read The Hill’s article, Stores, Banks Team Up to Fight Hackers, see here.

Baseball Takes a Swing at Excessive Swipe Fees

The high cost of credit card swipe fees is getting more attention these days and it’s not just from Main Street retailers. America’s favorite pastime, baseball, has now stepped up to the plate and joined the fight against these skyrocketing fees as the Minnesota Twins just levied an antitrust suit against Visa and MasterCard, accusing them of price-fixing swipe fees and monopolizing the marketplace.

Make no mistake about it, this insidious fee impacts businesses of all shapes and sizes. Any purchase paid for by plastic is subject to a swipe fee of two to four percent of the price of the transaction whether you are buying a ticket to a baseball game or picking up a gallon of milk from the corner grocer.

Take, for instance, the cost of a Super Bowl ticket from earlier this month. The face value of tickets ranged anywhere from $500 to $2,600. Two percent of $2,600 is $50. If that ticket is sold at the average $4,300 resale price through a ticket dealer, the bank will take in another $86. That’s nearly $150 in swipe fees on a single ticket and with 83,300 seats in the MetLife Stadium, the banks and credit card companies brought in millions of dollars for transactions that could have been done profitably for mere pennies. Given this, it’s no small wonder that families in the United States pay an estimated average of almost $500 a year in swipe fees.

For more on the Minnesota Twins’ lawsuit against Visa and MasterCard, see here.

Chip and Pin: Not a Simple Quick Fix

In her article, 'Debit or Credit' Becomes A Point-of-Fail, Kelly Jackson Higgins discusses how recent data breaches have spurred retailers, lawmakers and the banking industry to seriously rethink security options for card payment systems. She includes the following third-party observation:

"Banks have gone out of their way to make us [consumers] feel comfortable. They're just charging the retailers for this, but it's going to hurt the retail industry," says Avivah Litan, distinguished analyst with Gartner. "Maybe banks will now move on chip and PIN" sooner, she says.

While it is true that retailers pay a disproportionate share of fraud costs and the reality of recent data breaches will goad banks and retailers both to make changes, we must be sure that they are the right kind of changes. The move to a computerized chip embedded in the card is not the complete solution to fraud in the United States.

First, merely adopting the chip cards without the requirement of PIN numbers, as the credit card companies had proposed, is a half-measure that will not make customer data and card transactions wholly secure. Yes, the chip is extremely difficult to counterfeit but without the second layer of cardholder authentication offered by the PIN, it does not solve for lost or stolen card fraud or Internet fraud.

Secondly, it’s important to note that the standard called EMV that the major card brands, Visa and MasterCard, are pushing for is actually their proprietary technology and opens the door for them to extend their already-powerful duopoly. Merchants are concerned that adopting EMV will allow the credit card companies to maintain their dominance in this technological arena and as a result prevent a competitive market from forming, perhaps one that moves beyond cards to customers using their mobile devices to make purchases.

No good can come from this kind of non-competitive market. We’ve seen proof of that with the credit-card companies’ exorbitant swipe fees. If the duopoly of MasterCard and Visa stymie competition in technology, too, in the long run it only ends up hurting both consumers and merchants.

EU Court Adviser Puts MasterCard in Its Place

MasterCard is doing everything in its power to fight EU regulator’s 2007 decision to limit the fees European retailers pay for processing credit and debit card transactions. Fortunately, it seems like nobody believes MasterCard’s claim that capping interchange fees is not beneficial to merchants and consumers. Earlier this week an adviser to European Commission said MasterCard’s appeal should be completely dismissed.
 
European retailers stood up against credit card giants: Visa and MasterCard and have been fighting for a fair and competitive payments system. However, MasterCard doesn’t want to let go of huge interchange fee profits. Limiting swipe fees to 0.2 percent for debit and 0.3 percent for credit translates to €6 billion a year in savings for retailers and consumers in Europe.
 
Bloomberg quoted the CEO of Europe’s biggest home improvement retailers, Kingfisher Plc:

“Stimulating competition in the payment services market and ensuring fair interchange fees will create capital to enable a range of investments to be made.”

In U.S. transaction fee rates are even more overblown. They are 7 or 8 times higher! This reduces retailers profits significantly and forces them to either raise prices, which hurts consumers and limits their spending or prevents merchants from hiring new employees.
 
The EU court should make a decision within next 6 months and it usually agrees with the advisers’ opinions. In this case, the advice is spot-on.

States Need to Make Sure "Nobody Is Swiping Our Lunch"

Merchants refuse to pass constantly growing swipe fees onto customers paying with credit cards even though in most states they are allowed to do so. In today’s highly competitive retail market nobody can afford to push customers away.
 
In many places, like NJ, lawmakers have been very quick to introduce bills that would ban surcharging. In a recent article The Record columnist John Cichowski says such law would be a purely cosmetic fix to a problem that doesn’t exist. It might prevent sellers from adding an additional fee to credit card paying customers’ bills but it doesn’t stop credit card companies from charging merchants pre-set and unreasonably high fees that significantly reduce their profits and force them to raise prices for all customers. In the end, even customers paying with cash end up paying more.
 
To fix the swipe fee market, lawmakers need to look closer at the way those fees are set by Visa and MasterCard and force them and banks issuing the cards to compete for merchants’ business just like retailers compete for a customer.
 
“The people who pay these fees – either directly or indirectly — need lawmakers to dig deeper than cosmetic solutions to make sure nobody is swiping our lunch.” Cichowski says.
 
Read the rest of the article here.

Banks Mark Up Swipe Fees By 500%. Why? Because the Fed Won't Stop Them

In a recent report, the Federal Reserve found that it costs banks and credit card companies about 5 cents to process a debit card transaction. With all of our technological advances, that amount sounds reasonable, and debit card reform, as legislated in the Durbin Amendment, said banks should charge a "reasonable" fee for swiping their cards. Only problem is they don't charge 5 cents. They charge 24 cents, and the Fed is doing nothing about it.

It is a 500% markup! Unthinkable in any other marketplace.
 
The Durbin Amendment required the Federal Reserve to limit swipe-fees on debit cards that banks charge merchants and make sure the fees are relative to the actual cost of processing those transactions. New rules capped interchange fees charged by big banks at 24 cents, excluding institutions with less than $10 billion in assets. This reduction, however, remains grossly out of sync with the costs to swipe a card. The banks continue to profit unfairly from the swipe fee paid for by not just merchants but consumers in the form of higher prices.

Read the Merchants Payments Coalition’s press release on Federal Reserve’s newest report here.

Credit Union Survey Echos Other Reports: Durbin Amendment Works

In an interview with the Credit Union National Association, the Credit Union Times reported that credit union profits from debit cards have been largely unaffected by a reduction in the debit card swipe fee.

Just like recent reports by the FTC, the Federal Reserve and GAO, the CUNA survey shows that debit reform, as legislated by the Durbin Amendment, has benefited small banks, credit unions and consumers, disproving the big banks' false claims that reduced debit fees have harmed small banks and credit unions.

In a recent press release by the Merchants Payments Coalition, Lyle Beckwith, Sr. Vice President for Government Relations at NACS, talks about how big banks are misleading the public with false statements about the impact of debit card swipe fee reduction in order to avoid further reforms.

“The big banks have pushed the line that small banks are suffering as a way to stymie further reforms on rising swipe fees on credit cards, but the facts simply don't back them up,”

MPC’s full release can be found here.

Swipe Fees Drastically Slashing Supermarkets’ Thin Profits

Not many of us realize that when we quickly grab a $3 carton of milk from the neighborhood grocery store and pay with a debit card, the swipe fee that the store operator must pay the bank to process the transaction can be higher than the fee the store pays on $200 worth of groceries.

How can this be? Because the Federal Reserve is allowing banks to charge the maximum for a debit card transaction -- 22 cents -- under the Durbin Amendment, which reduced debit card fees from 42 cents a transaction.  The Durbin Amendment did not intend for banks to be able to charge 22 cents for a carton of milk or a cup of coffee, but that is the way the Fed is implementing the law.  A group of merchants have sued the Fed to make changes.

“These transaction costs have been eating into profit at an increasing rate,” says Bill Bishop, chairman of Willard Bishop, a consulting firm based in Barrington, Ill. “Retailers have been focused on trying to reduce them.”

Read more from Richard Turcsik, editor of Grocery Headquarters Magazine, here. 

Small Banks Benefitted, Not Harmed, By Durbin Amendment

Visa and MasterCard Under FTC Probe

In a recent report, the Federal Trade Commission has taken a close look into debit card transactions and found that small banks have not been hurt by the Durbin Amendment that lowered swipe fees charged by card companies and banks with assets above $10 billion. The report also announced that the FTC is investigating Visa and MasterCard for practices that might have prevented merchants from using lower cost processors of debit card transactions -- in violation of the Durbin Amendment.

From the report:

“…(I)nterchange fees paid to exempt issuers are higher than those paid to non-exempt issuers. A recent report by the General Accountability Office also concluded that ‘community banks and credit unions have not, on average, experienced a significant decline in their debit interchange fees…. This is consistent with early reports that the payment card networks had adopted a two-tier fee structure for exempt and non-exempt issuers.”

Doug Kantor, counsel to the Merchants Payments Coalition said:

“The FTC report confirms what merchants have been saying all along, that after the reforms small banks and credit union would not only not be harmed by debit but also would benefit from reform, along with consumers, merchants and the overall economy,”

For more information read Merchants Payments Coalition press release here and FTC report here.

Facts About The Broken Credit Card Swipe Fee System

Current swipe fee system is not working and it needs improvement, clarity and government oversight. Right now it is completely controlled by Visa, MasterCard and major banks that charge merchants unjustifiably high transaction fees that significantly reduce business owners’ profit margins. Retailers can’t opt-out or comparison-shop. U.S. card fee system lacks transparency, competition and is almost impossible for merchants to decipher.

Facts:

• In the U.S., banks take between 2 and 3 percent of every credit card purchase.
• The average profit margin for U.S. merchants is 1-3 percent. That means the swipe fees going to the banks equal or exceed the business owner’s profit on each transaction.
• Right now, many small business owners don’t even know the cost of each transaction because the system dictated by the credit card companies and the banks keeps fees hidden and remarkably complex.
• Currently, Visa has over 70 swipe fee categories while MasterCard has over 240 different categories.

Swipe fees are out of control and constantly growing, even though with today’s technology the actual cost of processing credit card transactions should be minimal and U.S. has the highest fees in the world hurting both merchants and consumers.

Facts:

• Today, hidden swipe fees are costing average consumers hundreds of dollars a year – no matter how they pay for their purchases.
• U.S. swipe fees are 7 or 8 times higher than the standard European rate on each transaction
• Hidden swipe fees cost Americans more than all credit card annual fees, cash advance fees, over-the-limit fees, and late fees combined
• Hidden swipe fees cost Americans more than all credit card annual fees, cash advance fees, over-the-limit fees, and late fees combined

For more facts about swipe fees read:

• The Facts About Debit Reform
• The Facts About Credit Card Swipe Fees
• “Swipe Fee” Reform – International Lessons

Unfairness of Swipe Fees

Swipe fees are a huge burden for small business owners across the country. Ted Burke, a restaurant owner from California, talks about how powerless he feels when faced with credit card companies’ unrestrained ability to set non-negotiable and unreasonably high rates.

“Business owners like me can negotiate virtually all of our costs, but we are powerless to negotiate swipe fees. This is because the major credit-card companies set rates on behalf of the banks that offer their cards, not on the cost of processing. That is the opposite of the free enterprise system, it is not right and it costs consumers as well as merchants.”

As the prices go up, banks raise their fees even though it doesn’t cost them a penny more to process transactions. Mr Burke says:

“Typically, this kind of technological improvement drives down costs. The swipe fees, however, just keep going up. 

Moreover, banks are double-dipping - they are already protected from inflation because credit swipe fees are assessed as a percentage of each sale. Thus, when menu prices go up, so does bank revenue. Yet the banks keep raising the percentage rate to take a bigger bite, making transactions more expensive. 

I view the banks and credit-card companies as unwanted business partners. They do not work anywhere near as hard as I do, yet they collect nearly as much in fees as the average restaurant earns in profit.”

Read the rest of Ted Burke’s article here.

Time for Congress to Put an End to Visa-MasterCard Price-Fixing

While business owners are struggling to keep operating costs and prices down, credit card companies and big banks charge them swipe fees that are extremely high and unreasonable if we consider how little it actually costs the banks to process credit card transactions.

Bill Leichsenring, the owner of two restaurants in Iowa, describes how much credit card fees hurt his businesses and calls on Congress to act and bring transparency and competitive pricing to the swipe fee system.

“We need transparency and competition. We need the ability to negotiate to reduce our operating costs so we can hold down prices.

I believe in free markets and don’t usually advocate government interference. But in cases like this, where the market is clearly broken, Congress needs to step in.

Members of Congress should determine why U.S. card swipe fees are so much higher — including the ratio of what is charged businesses vs. actual costs — and set about demanding competitive market pricing for swipe fees instead of the price-fixing we have today.”

Read Leichsenring’s article here.

Holiday Shoppers Be Aware

With the holiday season almost here and shoppers crowding stores and restaurants, Scott DeFife, Executive Vice President for Policy & Government Affairs for the National Restaurant Association, reminds us that every time we use our credit card, banks and credit card companies charge merchants a hidden and unjustified swipe fee.

With Visa and MasterCard dominating the market, business owners cannot negotiate swipe fees and the only choice they have to avoid them is not to accept credit cards, which would be the kiss of death.

 “Another clear indicator of a broken market is the fact that restaurant owners can’t negotiate swipe fees the way they can negotiate for nearly every other business expense. It’s a take it or leave it deal – either accept the fees as they are or don’t accept plastic. That’s not a real choice if you want to attract customers. And, merchants can’t even be sure that the fees they pay are correct. When a customer gives a credit card to the cashier or server, there is no way of knowing what the fee will be for that card, since the rates vary by card and by reward program.”

Lyle Beckwith, senior vice president for government relations for the National Association of Convenience Stores, calls swipe fees “a hidden tax” that goes directly to banks. Not many know about it and yet we all pay the price:

“Even though swipe fees are invisible to consumers, they result in higher prices, even for those who mostly pay with cash and rarely use a card. The only difference between swipe fees and taxes is that the $50 billion in revenue that the swipe fee generates every year goes directly to banks rather than to the government. Every American household on average pays about $427 a year in the swipe fee “tax.””

Read DeFife’s article here and Beckwith’s article here.  

The Market Power of Visa and MasterCard

New York Times Economix blogger Nancy Folbre who earlier this month wrote about unfairness of swipe fees has taken a closer look at how extremely complicated the fee system is for merchants to maneuver and how business owners are left with no choice but to pay exceedingly high fees:

“This market structure is hard to discern, because cards themselves are issued by different banks, with different terms — and they come in many different colors. Among issuers, the top 10 credit-card-issuing banks accounted for more than 90 percent of outstanding credit card debt in 2009.”  

“Both the payment networks and the card issuers operate in a “two-sided” market — selling their services both to consumers and to merchants. Consumers can engage in at least some comparison shopping — considering both terms of service and interest rates charged by different providers.”  

“Small businesses, however, have long been limited in their ability to steer customers toward credit cards that charge lower fees, partly as a result of payment-network rules and partly because they fear inconveniencing their customers and reducing sales.” 

“Payment networks and card issuers know how to exploit that fear, and they have a common interest in extracting as much revenue as possible from the merchants who rely on their services. Their market power puts them in a strong position to do so.”

 To read the entire blog, see here.

Credit Card Industry Buries Merchants In Paper, Killing Their Bottom Line

This article in a trade publication for tire dealers demonstrates how the credit card industry buries merchants in paper about the various swipe fee options merchants pay to banks and credit card companies when customers use their debit and credit cards. By the time merchants read all the fine print, they are never sure if they have the best deal or the worst deal. All they do know is the fees -- worth $50 billion a year in revenue to the card industry -- is killing their bottom line. Here are just a few excerpts from the article.

Read the entire article here:

To Fee or Not To Fee
Modern Tire Dealer

.... Unraveling the mystery of credit card fees ... it’s important to make sure every tire and service shop understands the credit card jargon: Discount rate — price paid by business to process payment transactions. Usually consists of a combination of items:

1. Interchange rates — rates are determined by card associations, i.e. VISA, Mastercard, and paid to the issuing bank, and are usually a percentage plus a transaction amount.
2. Assessments — fees determined and paid to the card associations (approximately 11 basis points).
3. Mark-ups — profit add-ons by your merchant services bank.
4. Other fees — authorization request fees:

• monthly statement fees,
• monthly minimum fees,
• batch fees,
• customer service fees,
• annual merchant fees, and
• chargeback fees.

NOTE: These may vary as to how they’re labeled on monthly statements. If it seems like there is an endless list of fees, this is just the tip of the iceberg. There are also a variety of methods in which merchant service programs are marketed by service processors. Here are some examples of merchant service programs which are offered to dealers:

• Interchange plus — the interchange rate plus a bank markup.
• Fixed rate plus — a minimum interchange rate, plus excess of interchange in excess of minimum.
• Tiered pricing — transactions put into tiers based upon transaction types.
• Bill backs – a variation of interchange plus.

The next issue is making sure that your transactions are charged the lowest possible rate available per the program that you are with. David Eckroth, controller for Northwest Tire Inc., Bismarck, N.D., spoke to his 20 Group dealers recently on the topic of credit card fees: “Managing processing costs is critical in keeping the fees as low as possible. One way to do this is to avoid downgrades, or transactions which do not meet the card association requirements to qualify for lowest interchange rates. The main reasons for downgrades are: key entering rather than swiping; not using AVS (Address Verification Service) on key-entered transactions; not settling transactions daily; and not answering questions for input items such as sales taxes.”

Managing card disputes 

Sometimes the bank will “chargeback” a transaction (cost of goods plus fee) when the customer disputes a charge. When this happens, the amount is sometimes automatically deducted from your checking or savings account along with any chargeback fee.

While this doesn’t happen often in tire and service transactions, it can happen and dealers should be aware of this potential action from an unhappy customer.

A cardholder can initiate a chargeback within 120 days of the delivery date of the products and/or services. A card issuing bank also can initiate a chargeback within seven to 75 days.

Some chargebacks can be reversed and resolved in your favor without the loss of the sale. It’s important that the dealer provide all of the information regarding the transaction, such as proof of delivery, signed receipt, invoice, etc. Document how this information is provided through the Electronic Integrated Dispute System (eIDS) within 14 days of the chargeback issuance date.

Preventing credit card disputes 

Of course the best way to avoid card disputes is to satisfy customers even if they end up with a higher ticket than anticipated. Eckroth provided a guide on how to prevent card disputes before they end up being a problem.

Eckroth also suggests that at least once a year you should request a review from your credit card merchant services processor.

Ask to review the makeup of cards accepted, a review of the history of any downgrades, and have them provide a detailed cost analysis of all transaction fees.

How to reduce credit fees

Hank Feldman, president of Performance Plus Tire and Automotive in Long Beach, Calif., recently won second place in his 20 Group’s Best Idea Contest for giving his group a simple three-step approach to reducing fees. If dealers follow these steps, they will secure the most competitive fees, he says:

1. Quote: Get quotes at least twice a year; they can be done over the phone; use only direct processors; and send two months of statements for review.
2. Negotiate: Always ask for the interchange rate plus the lowest possible markup; always ask for the lowest possible per-transaction fee; ask for same-day credit at the bank (24 hours); ask for free equipment; and offer your existing provider the opportunity to match rates.
3. Monitor: Request monitoring of transactions to ensure your account is set up correctly, avoiding increased interchange rates; get verifiable references; and ask for a dedicated account representative.

... Take these steps to prevent credit card disputes Provide a superior customer experience Card not present at point-of-sale

1. Indicate business name and customer service phone number on cardholder statements.
2. Email order, shipment and credit confirmations.
3. Provide accessible live customer service agents.
4. Clearly indicate your return and shipping policy and request that shoppers “click and accept” the policies before the transaction can be completed.

Manage fraud at the time the transaction is processed Card present at point-of-sale

1. Always obtain an authorization for the full amount, at the time of the purchase and via your terminal.
2. Always swipe the card (do not key enter), review customer signature and verify the card number.
3. Refuse a card which is declined for authorization.

Card not present at point-of-sale

1. Use Address Verification Service (AVS) and CVV2, CVC2 and CID (three-digit code) verification. These are security features for credit card transactions on the Internet and over the phone. CVV and CID represent Card Verification Value (varying with the card issuers).
2. Obtain signed proof of delivery.

Manage chargebacks and retrieval requests Both card present and card not present at the merchant’s point-of-sale

1. Review chargebacks and retrieval requests regularly.
2. Respond promptly to retrieval requests.
3. Research and manage your chargeback and retrieval requests on ClientLine.
4. Gain efficiencies by resolving disputes online, with Electronic Integrated Dispute System (known as eIDS).
5. Use the online Resolve Chargeback Tool.

Credit Card System Broken & in Need of Fixing

The Hill reported recently in its "On The Money" blog that retailers and banks are "ready to go another round over credit card swipe fees."

Reporters Vicki Needham and Peter Schroeder wrote:

"Retailers are pushing for changes to credit card swipe fees nearly a year to the day after they triumphed in one of the biggest lobbying battles ever. 

"The Federal Reserve lowered the fees that merchants are charged when customers swipe a debit card last year, handing a decisive win to retailers after a multi-million dollar advocacy war with big banks. "

"With that victory notched, retailers are coming back for more, this time setting their sights on a credit card market overhaul they say would end a bank monopoly on pricing and increase competition."

"Retailers say they have canvassed Capitol Hill and have found broad agreement that the credit card system is broken and in need of fixing."

Read more here.

Federal Reserve Overstepped Bounds By Catering To Banks & Ignoring Congress

In a Washington, DC federal courthouse this week, lawyers for merchants made a convincing argument that the Federal Reserve overstepped its bounds by catering to banks instead of doing what Congress instructed in legislation reforming debit card swipe fees.

Congress, they told the court, was clear about setting reasonable debit swipe fees and ensuring greater competition among card networks. It’s also clear that the Fed ignored Congress.

Fees charged to swipe both debit and credit cards for purchases total about $60 billion in revenues for banks and credit card companies, costing U.S. households hundreds of dollars a year. For merchants, swipe fees are the second highest cost for them, after labor. Swipe fees also have tripled since 2004, even while technology has lowered the cost of card transactions.

Part of the Dodd-Frank law included the Durbin Amendment, which sought to bring competition to debit card networks that process the transaction and to reduce the fees for using debit. The amendment instructed the Fed to set debit swipe fees that are “reasonable” and “proportional” to the banks’ costs. The Fed had determined the cost to be 5 cents a swipe.

After Durbin passed, the Fed dropped debit swipe fees from an average 42 cents a transaction (over 10 times actual cost) to 12 cents. The big banks, however, immediately leaned on the Fed, forcing their regulator to set the debit swipe fees at 21 cents, five times the banks’ actual cost, plus .05 percent of the transaction and an additional one cent for fraud prevention.

The banking lobbying convinced the Fed to cram the many costs of running a bank into an overinflated fee, rather than focusing on the banks’ cost of handling a debit transaction. The Fed also undercut Congress’ intent to make the debit card industry more competitive by not allowing merchants to choose among networks to process a sale.

As a result, consumers and merchants have not realized the savings they could have, and fees have actually increased for debit card purchases less than $15.

In too many instances, swipe fees eat up a merchants’ profit.

The Food Marketing Institute, National Association of Convenience Stores, National Restaurant Association and National Retail Federation filed the suit challenging the Federal Reserve’s rules. All of them are members of the Merchants Payments Coalition, a group of retailers and merchants who are concerned about the rising costs of swipe fees on both debit and credit cards. The MPC continues to push for credit card reform, in addition to correcting the implementation of the Durbin Amendment, which went into effect a year ago on October 1, 2011.

Visa and MasterCard together control 80% of the credit card market allowing them to dictate the amount of swipe fees that their member banks charge for each purchase. This kind of price-fixing is not allowed in other parts of the economy. The swipe fee rate varies card by card so a merchant never knows what the fee will be for any specific transaction. Visa has over 70 swipe fee categories while MasterCard has over 240. The fees also are 7 to 8 time higher than the standard European rate.

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