Major Banks In Talks To Exploit Debit Card Loophole (msn.com)
- Reference: 0184345076
- News link: https://news.slashdot.org/story/26/07/07/1726247/major-banks-in-talks-to-exploit-debit-card-loophole
- Source link: https://www.msn.com/en-us/money/markets/jpmorgan-bank-of-america-and-other-banks-explore-a-deal-to-shake-up-payments-world/ar-AA27ltkp
> When Capital One Financial bought Discover Financial in a $50.6 billion deal, it got a network that cut out the need for a middleman in card transactions and allowed it to deal more directly with merchants. Now, big banks are looking on with envy because owning a network can mean exemption from a federal law that caps debit-card fees. Those fees collectively amount to billions of dollars each year across the industry, but banks have long complained the government-defined cap limits their ability to offer customers debit-card rewards and other services. Some have been exploring a small deal that could upend the rules, though they are worried about political backlash if they try.
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> Big banks including JPMorgan Chase, Bank of America, Wells Fargo and PNC Financial Services Group have in recent months held preliminary and tentative discussions about a deal to acquire a network owned by the financial-technology company Fiserv, according to people familiar with the matter. There is no certainty a deal will happen. Several of the banks that looked at the Fiserv network have already decided it would be unlikely for them to move forward, some of the people said. Some have privately expressed concern that such a deal could prompt backlash from lawmakers, regulators and merchants, the people added.
[1] https://www.msn.com/en-us/money/markets/jpmorgan-bank-of-america-and-other-banks-explore-a-deal-to-shake-up-payments-world/ar-AA27ltkp
Time to establish a cap for in-network. (Score:5, Informative)
It really does not make sense to have a cap only for out-of-network, when in-network arguably are less cost for the institutions. But of course banks are spending a lot of money on both parties so...
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yup, this seems really like a 'contact-your-friendly-representative' regardless of political affiliation thing
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The cap out of network was established to force the network companies to become sort of generic open infrastructure companies rather than being able to establish and abuse a monopoly position or by strengthening one company over another by negotiating different rates.
I know what you're saying, and yeah fees should be capped, but it made sense for its purpose.
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No, it may have made sense since it didn't matter. Now it matters, and I wouldn't be surprised if there was a bipartisan push to change that very soon. Not that I expect it to be quick, I'm still hearing ads from Visa and Mastercard about the Durbin-Marshal bill.
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The in-network exemptions (issuer-is-network) were exclusively carved out for Senator Durbin, as Discover Financial Services (a part of Cap1) is an Illinois company that employs 6,000+ people in the state. Discover getting a debit interchange carveout made them more competitive.
The problem is now that it exists, other large banks are looking at a swipe fee advantage now that Cap1 acquired Discover and that Dick Durbin is now on the verge of retirement unlikely to buck his prior law, the other large banks
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> It really does not make sense to have a cap only for out-of-network, when in-network arguably are less cost for the institutions. But of course banks are spending a lot of money on both parties so...
At some level, it does. When these laws were passed, I think the main goal was to stop companies from charging exorbitant fees to other companies' cardholders when using their ATMs to withdraw money and similar. You wouldn't want to do that to your own customers, because you'd lose them as customers, so why would the government regulate it?
But now, years later, in the context of retail sales, card companies want the opportunity to charge higher fees to retailers so that they can give rewards, confident th
This isn't a loophole (Score:2)
It's the credit card Network. And this is a slashvertisment.
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Da fuq are you on about? What is the product I can buy or service I can get?
I mean is it news for nerds? Not really.
Is it par for the course for slashdot? Yup.
Yell at the cloud, I won't stop you.
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NO, the big banks want to own their own DEBIT card network so that they are not limited on the fees they can charge, those fees are government limited when using the existing third party networks like Visa, MasterCard, and American Express.
How does this get modded insightful, it is completely ignorant of the facts stated in the summary.
At What Point Does It Rise To Collusion? (Score:3)
> JPMorgan, Bank of America, Wells Fargo, PNC... reportedly explored acquiring Fiserv's debit-card networks, STAR and Accel, in a move that could help them bypass federal caps on debit-card transaction fees.
So at what point does this rise to the definition of collusion? This seems to fit my understanding of the definition.
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When competitors stop competing and agree on setting a higher price. Buying a company that provides a service to yours doesn't count. That's "vertical integration".
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When a ordinary non-rich person attempts to use the same loopholes or create some kind of "threat" that will make the banks even think about spending money...then it will become Collusion and Terrorism
debit card rewards (Score:4, Funny)
yeah, damnit, we can't charge you X so we can give X - some amount back to you and call it a reward
fucking reward schemes suck
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Yup, these rewards are really scammy. Just give me lower prices up front so I can buy what I want, not random reward crap.
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The rewards program for my credit union's credit card has a bunch of that random reward crap, but they also have a nice "Just give me 1% in cash" option. Whenever I've skimmed the list of random crap, the cost in reward points was almost always higher than if I took the 1% cash and just bought the item in a store.
I never use my debit card,... (Score:2, Insightful)
...and use a credit card instead. Why?
A debit card is a direct line to your bank account. If someone fraudulently steals money from my account, that's my problem.
A credit card is a buffer (with a limit) between a thief and my bank account. If someone compromises my credit card, that's the bank's problem.
Re:debit card rewards (Score:5, Informative)
That "reward" comes from the money the merchant pays, and then they just raise the price of the product to compensate for their calculated loss. Rewards are not free magic money , you actually paid that money up front when you bought the product, and here the CC company is just giving you a mere fraction of that increase in price back to you, just to make you feel good. Are people really this stupid?
Re:debit card rewards (Score:4, Insightful)
Let us not be under the illusion that business owners would lower their prices if it wasn't for those 'dang fees'. Once they realized you'd pay the hire price, if the fees are gone, the businesses are just going to go 'yummy more money for me'.
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> Let us not be under the illusion that business owners would lower their prices if it wasn't for those 'dang fees'. Once they realized you'd pay the hire price, if the fees are gone, the businesses are just going to go 'yummy more money for me'.
Depends on how crowded the market is. If there's healthy competition, they might, or one of their competitors might, forcing their hand.
Re:debit card rewards (Score:4, Insightful)
Exactly. I was shopping recently for a high value item. I found one vendor who had it for sale with a 3% credit card fee. Another vendor had it for sale $1500 less. I asked him if he charged a credit card fee. He said no, that was the out the door price. So I bought it from him.
So the 3% was already in the lower price, but the other vendor was trying to double dip on fees.
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Many businesses offer discounts for paying in cash (if their agreements with credit/debit card companies allow it). Even with no discount, I'd rather have my money go to local business owners than to a bank.
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> Many businesses offer discounts for paying in cash (if their agreements with credit/debit card companies allow it).
If I remember correctly, merchants could always give a discount for paying in cash, but they couldn't charge extra for paying with a card. They may be effectively the same thing, but what the credit card companies didn't want was people being unhappy that they were being charged more than the advertised price. Obviously the credit card companies did it for their own benefit, but it was also good for the customers.
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I was at a welding supply store one day last year and the guy still wasn't taking credit cards. I explained the concept of adjusting his prices up and offering a percentage off for cash sales. Next time I was there he had done that. Since I had brought cash I didn't pay the higher card price that time but since then I've gone in and used the card out of convenience.
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I mean thats the honest truth. They would just take the money. There really aren't industries that competitive where they would gain a whole lot of market share if they could charge lower interchange fees. It would make a difference on the margin for small struggling businesses. Its one of those things where they look at costs, and see the large number next to processing fees and try to figure out ways of not paying it. They're doing the same with electricity, wages, costs of products they sell, taxes, etc.
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It used to be, maybe still is in some cases, the merchant contract forbid them from charging a different price to non-card customers. So if you wanted to accept cards at all you could NOT offer a lower cash/debit price.
The other reality is cash handling is actually expensive for retailers. I used to work retail finance decade ago so some of this is out of date info, but generally speaking on an activity based cost analysis, the merchant fees were lower than cash handling costs. At least in the later 90s an
Re:debit card rewards (Score:5, Insightful)
No, No no. Silly people who think they understand things. The money is charged to the merchant, yes thats true. However, you with a rewards card get charged the same price as Joe Schmoe who does not have a rewards card. You are paying less because you get the reward. Joe Schmoe is getting screwed. So get the rewards you can so you pay lower prices.
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This, Cash payers get taken. The reward is the way the card companies push the actual costs onto those without cards.
If there we a 'don't be scum' law, the card companies would be in big trouble.
Use the magic words (Score:2)
> The money is charged to the merchant, yes thats true.
How much off for cash?
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Nothing, they wind up paying for most of the fees thanks to card users getting a 'reward'.
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> they wind up paying for most of the fees
Not if I pay cash.
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> That "reward" comes from the money the merchant pays, and then they just raise the price of the product to compensate for their calculated loss. Rewards are not free magic money, you actually paid that money up front when you bought the product, and here the CC company is just giving you a mere fraction of that increase in price back to you, just to make you feel good. Are people really this stupid?
It is worse than that. Airlines are now making more money from credit card deals than flying flights. This whole kickback system has been hugely corrupting. Now they want to extend it to debit cards. It is past time to get rid of the entire thing.
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Don't forget the (usually correct) assumption that people won't pay off their purchases at the end of the cycle, leading to interest greater than any "reward".
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> That "reward" comes from the money the merchant pays, and then they just raise the price of the product to compensate for their calculated loss.
All that means is that you are punished for NOT using a rewards card. The merchant has already baked the cost of doing business with the CC reward companies into their price, so if you pay with a simple debit or a card that offers no rewards, you are paying the higher price to no benefit. I pay off my CC bill every month anyway. I might as well get 1% or whatever pittance back as an Amazon gift card or whatever every few months. It is better than paying the same price and getting nothing.