Walgreens amendment shifts costs to consumers

[hegemony]

http://dailycaller.com/2010/05/13/durbins-...s-to-consumers/

[athensgaguy]

Maybe issuers will start charging back defaults to the merchant.

[breeze]

Defaults? What defaults?

[athensgaguy]

Defaults? What defaults?

If my check bounces, the merchant is on the hook.

 

If I don't pay my CC bill, the bank is on the hook. That's part of what the interchange fees pay for. Maybe if interchange fees are capped, the bank should be able to charge the merchant the amount I didn't pay if I default on my CC.

[frank22]

Defaults? What defaults?

If my check bounces, the merchant is on the hook.

 

If I don't pay my CC bill, the bank is on the hook. That's part of what the interchange fees pay for. Maybe if interchange fees are capped, the bank should be able to charge the merchant the amount I didn't pay if I default on my CC.

 

I think the banks can continue to get that through the over 10% spread they get on what they pay for money and what they charge in normal credit card rates. That and not giving out cards to anyone with a pulse should do wonders. The banks had said the credit environment and the risks involved is why they had to raise everyone rates, they never pretended that normal credit risks for these fees. You are making a case for the banks they have never made for themselves. Do you think the high interest rates they charge should be risk free? All the risk go to the merchant? Why such a high rate for low risk loans?

 

I am sure the banks appreciate on how you are looking out for them and all. I have never seen them loved so much!

 

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

 

This is kind of like the tax issue, something that one normally wouldn't be concerned about all of a sudden becoming a worry. Did you ever worry before about who paid for the risks associated with credit cards before? What did you think the high interest rates were for? Maybe you could have a bake sale for the banks, I won't be buying any muffins.

Edited May 16, 2010 by frank22

[hegemony]

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

so these networks exist as not-for-profits? providing a service often means charging for that service.

 

what is next? merchants bullying politicians to get them free internet access?

[frank22]

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

so these networks exist as not-for-profits? providing a service often means charging for that service.

 

what is next? merchants bullying politicians to get them free internet access?

 

I'm sorry I wasn't clear. I meant the risk part of what they pay is only for the fraud, not the risk of lending itself l(which is part of the interest rate charged). I know that some of the fee is based on fraud risk. This won't change. A higher risk merchant will continue to pay more.

 

Partially fair I guess, it does appear at first glance that a merchant pays for this risk, but the banks get the income. I am sure it is more complicated though and I am not going to go off half cocked like everyone else.

 

Non-profit? I did say they make 80% gross margins, that part seems to be conveniently ignored, not non-profit by any means. You are disregarding facts, but misapplying and making up others to suite your narrative, it doesn't reflect the truth.

Edited May 16, 2010 by frank22

[athensgaguy]

Defaults? What defaults?

If my check bounces, the merchant is on the hook.

 

If I don't pay my CC bill, the bank is on the hook. That's part of what the interchange fees pay for. Maybe if interchange fees are capped, the bank should be able to charge the merchant the amount I didn't pay if I default on my CC.

 

I think the banks can continue to get that through the over 10% spread they get on what they pay for money and what they charge in normal credit card rates. That and not giving out cards to anyone with a pulse should do wonders. The banks had said the credit environment and the risks involved is why they had to raise everyone rates, they never pretended that normal credit risks for these fees. You are making a case for the banks they have never made for themselves. Do you think the high interest rates they charge should be risk free? All the risk go to the merchant? Why such a high rate for low risk loans?

 

I am sure the banks appreciate on how you are looking out for them and all. I have never seen them loved so much!

 

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

 

This is kind of like the tax issue, something that one normally wouldn't be concerned about all of a sudden becoming a worry. Did you ever worry before about who paid for the risks associated with credit cards before? What did you think the high interest rates were for? Maybe you could have a bake sale for the banks, I won't be buying any muffins.

 

Random?

[LBCS]

Defaults? What defaults?

If my check bounces, the merchant is on the hook.

 

If I don't pay my CC bill, the bank is on the hook. That's part of what the interchange fees pay for. Maybe if interchange fees are capped, the bank should be able to charge the merchant the amount I didn't pay if I default on my CC.

 

I think the banks can continue to get that through the over 10% spread they get on what they pay for money and what they charge in normal credit card rates. That and not giving out cards to anyone with a pulse should do wonders. The banks had said the credit environment and the risks involved is why they had to raise everyone rates, they never pretended that normal credit risks for these fees. You are making a case for the banks they have never made for themselves. Do you think the high interest rates they charge should be risk free? All the risk go to the merchant? Why such a high rate for low risk loans?

 

I am sure the banks appreciate on how you are looking out for them and all. I have never seen them loved so much!

 

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

 

This is kind of like the tax issue, something that one normally wouldn't be concerned about all of a sudden becoming a worry. Did you ever worry before about who paid for the risks associated with credit cards before? What did you think the high interest rates were for? Maybe you could have a bake sale for the banks, I won't be buying any muffins.

 

Random?

 

Yeah, this guy seems to be a space cadet.

[hegemony]

[

Edited May 17, 2010 by hegemony

[hegemony]

[

Edited May 17, 2010 by hegemony

[frank22]

I was trying to be a little humorous, maybe it didn't come off well.

 

People are channeling their pique in random speculation about things that don't make sense and things that they are not really concerned about. Merchants getting away with out paying taxes? Being forced to pay for fraud? Worried about what a very profitable company will do to retain their profits? Really? If you look at the statements for just a second they don't make sense. It also seems strange that all the anger is focused on the merchants and not for Visa or the banks. I am not naive to think that merchants are not concerned with the bottom line, they just have to be competitive.

 

No one knows what the final bill will be, but merchants are not going to want to lose profitable customers due to payment options. Banks still want us to use their cards. We won't be effected much at all. We may get a discount, and we may lose some value in the rewards program, but that is just speculation too.

 

The general population probably doesn't even know about it, and I am sure will deal with it without the anger that I see here, especially if the most apparent outcome is that we get the option of a discount for using cash. I am a consumer too, and I don't see this as a problem.

[WBOTM]

Seriously, I think the only thing the interchange fee actually paid for was the possibility of immediate transaction fraud, and some of the interchange fees are a part of it. I am sure whatever happens to the pricing of fees, the costs for fraud risk will still be part of it. As I said before gross margins of 80% are extremely rare in all but a few industries.

so these networks exist as not-for-profits? providing a service often means charging for that service.

 

what is next? merchants bullying politicians to get them free internet access?

Networks are not free, but I do find it interesting that banks typically assess "foreign" (non-customer) ATM fees of $2-$4 (other than in certain "clubs" or casinos) while a credit/debit swipe can cost a merchant 2-4% plus. The two types of transactions are processed in a very similar manner.

 

I do not think there should be regulations on rates, but MC/Visa operate in a monopolistic market environment. MC/Visa are not parties to merchant agreements but are able to set the rates/rules for all merchants. One option might be to allow a merchant to opt-out of accepting selected cards. Right now, merchants must accept all cards or none.

 

As a consumer, I would continue to shop at merchants that accept my rewards cards.

[LBCS]

I was trying to be a little humorous, maybe it didn't come off well.

 

People are channeling their pique in random speculation about things that don't make sense and things that they are not really concerned about. Merchants getting away with out paying taxes? Being forced to pay for fraud? Worried about what a very profitable company will do to retain their profits? Really? If you look at the statements for just a second they don't make sense. It also seems strange that all the anger is focused on the merchants and not for Visa or the banks. I am not naive to think that merchants are not concerned with the bottom line, they just have to be competitive.

 

No one knows what the final bill will be, but merchants are not going to want to lose profitable customers due to payment options. Banks still want us to use their cards. We won't be effected much at all. We may get a discount, and we may lose some value in the rewards program, but that is just speculation too.

 

The general population probably doesn't even know about it, and I am sure will deal with it without the anger that I see here, especially if the most apparent outcome is that we get the option of a discount for using cash. I am a consumer too, and I don't see this as a problem.

 

Mastercard and Visa are solely responsible for the explosive growth of the credit card industry. And deserve to reap the profits - that is the fundamental basis of innovation in this country. There are very strict rules about monopolies and collusion - if the government felt that these rules were broken they could have investigated this from a antitrust perspective. Price controls are rarely the answer.

 

Besides, someone had posted the link where a similar measure in Australia did not lower prices, all it did was reduce rewards for consumers and increase annual CC fees.

[frank22]

Mastercard and Visa are solely responsible for the explosive growth of the credit card industry. And deserve to reap the profits - that is the fundamental basis of innovation in this country. There are very strict rules about monopolies and collusion - if the government felt that these rules were broken they could have investigated this from a antitrust perspective. Price controls are rarely the answer.

 

Besides, someone had posted the link where a similar measure in Australia did not lower prices, all it did was reduce rewards for consumers and increase annual CC fees.

 

The author of the linked article you refer to is a director in the Competitive Enterprise Institute, an anti-regulation conservative think tank with a large amount of corporate funding. He took the GAO report out of context and left quite a lot out. It notes that the fee reduction was part of broader reform; they note there are many differences in the US market including economies of scale. They do not reach the conclusion he says they did.

 

http://en.wikipedia.org/wiki/Competitive_E...prise_Institute

 

CEI is a think tank funded by donations from individuals, foundations and corporations. CEI does not accept government funding. Past and present funders include the Scaife Foundations, Exxon Mobil, the Ford Motor Company Fund, Pfizer, and the Earhart Foundation. CEI cites its major issues of concern as Environmental Policy, Regulation and Economic Liberty, Legal and Constitutional, and Health and Safety. Among the methods used to implement the organization's agenda are various press releases and policy papers, testifying at governmental hearings, suits against various governmental agencies, paid advertising, editorial and op-ed pieces, open letters, books, and NGO operations.

 

http://www.gao.gov/new.items/d1045.pdf

 

 

From the GOA report:

In the 3 countries we examined in more detail—Australia, Israel,

and Mexico—reforms designed to effect reductions in interchange rates

were undertaken as part of broader efforts to change payment systems or

card markets; thus, isolating the effects of the interchange interventions is

difficult. Further, differences regarding the regulatory and market

structures between these countries and those of the United States make it

difficult to estimate the effects of any similar actions in the United States……

The extent to which similar actions to lower interchange rates in the

United States might reduce costs to merchants and consumers is unclear.

While actions in the three countries examined appear to have reduced the

costs to merchants for accepting cards, less information was available on

the impact on consumers. In Australia, for example, costs for card users

appear to have increased, but having these individuals experience higher

costs could be considered more efficient and appropriate than merchants

passing their card acceptance costs along to all consumers through higher

prices for goods and services, as RBA concluded was occurring before the

reforms. However, whether consumers choosing to make purchases with

other forms of payment have experienced any benefits was not clear…….

 

Although the imposition of

interchange fees was not found to violate the law, the trial court noted that

the defendants’ ability to impose and change the fees was evidence of

market power, which was an element in proving the anticompetitive

nature of the exclusivity rules.48 Further, DOJ officials told us that under

its authority to enforce the antitrust laws, DOJ is again looking into issues

concerning the payment systems industry.

 

The GAO report does talks of the lack of a competitive environment. The issue hasn’t been addressed previously politically in our country due to the power the banking industry has. Collusion is difficult to prove, but in an oligopoly with two major competitor companies, often individually, decide not to compete on price, as it would only result in lost profits. They are not proposing price controls on the credit card end, just the ATM, and I agree with you on price controls. My leanings are very market oriented; here I see where some tweaking is needed.

 

I think the part I highlighted is one of the hearts of the matter. There is some redistribution in costs going on and that could stop. Among other things, this will mean merchants and the banks may have to make a decision on how they will handle rewards. There are real marketing advantages to merchants for rewards, and they could very well decide to keep them as an incentive. It still is possible they may not have a choice. I don’t think merchants are going to be charging extra for card usage, it would lemonade too many people off, some will offer a discount, and some won’t be bothered. There will be the opportunity for negotiation on price and the costs would be a little lower for them, so they may not have to inconvenience or charge consumers more. It is really hard to say, but more to the heart of the matter than the red herrings of taxes, packaging(from another thread) and hoping merchants lose their fraud protection.

 

There are 5 competing interests involved, consumers, banks, Visa/Mastercard, processors, and merchants. Consumers are the least cohesive of the bunch, but we are were the money comes from and we still need to be catered too.

Edited May 17, 2010 by frank22

[breeze]

Some of you simply cannot discuss anything without referring to opposing political arguments.