Posts Tagged ‘government’

VMS-Washington – Visa, MasterCard to Swipe-Fee Settlement

Visa, MasterCard and the largest banks have announced a proposed multi-billion dollar settlement with U.S. retailers in a longstanding lawsuit over swipe fees charged by the networks.

Described as the “largest antitrust settlement in history” by plaintiffs’ attorneys , the agreement would require Visa, MasterCard several major banks, including JPMorgan Chase, Bank of America, Citibank and Wells Fargo , to establish a fund for $6.05 billion for roughly seven million merchants, who plaintiffs’ attorneys say have been adversely affected by the interchange fees the networks set. The case was due to go to trial in September.

“These are truly historic reforms that will help shift the competitive balance from what in the past has been dominated by the card companies and the banks over to the merchants and the consumers, by giving consumers both transparency and a choice for cheaper forms of payment ,” says Martin Lueck, a partner and chairman of the executive board at Robins, Kaplan, Miller & Ciresi, a plaintiffs’ firm involved in the lawsuit.

The settlement is in line with analysts’ previously estimates, which pegged a potential agreement at between $5 billion and $15 billion.

In addition to the fund, the networks have agreed to temporarily reduce for eight months the level of interchange fees by 10 basis points, a benefit estimated by plaintiffs’attorneys be worth $1.2 billion.

Visa and MasterCard will also drop so-called “no surcharge” rules, which previously prohibited retailers from tacking on additional fees to the consumer for using a credit card.

“Now me payment payment.”

In addition, the companies have agreed to negotiate with groups of merchants collectively over interchange rates going forward.

Visa says it will record a litigation of $4.1 billion for the quarter ended June 30, 2012, increasing its reserves from $285 million to approximately $4.4 billion, which it will fund through a preexisting litigation escrow account. The card network had previously put more than $4 billion in that account.

“We believe settling this case is in the best interests of all parties,” said Joseph W. Saunders, Chairman and Chief Executive Officer of Visa Inc., in a press release Friday. “We are comfortable with the terms, which we do not anticipate will impact our current guidance. Visa is well positioned to help drive the migration to electronic payments in the U.S. and globally.”

MasterCard previously agreed to pay 12% of any potential settlement involving Visa and the banks. The card network said on Friday that its share of the cash portion of thesettlements will total $790 million before taxes. It plans to add an extra $20 million pre-tax charge in its second quarter 2012 financial statements, as it had previously recorded a $770 million charge in its fourth quarter 2011 financial statements, the company said in a press release.

“Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution,” said Noah Hanft , MasterCard’s General Counsel and Chief Franchise Integrity Officer, in a press release Friday. “Although we have strong defenses to all claims, a settlement avoids years of litigation and uncertainties that are inherent in such cases. We believe that today’s settlements should resolve all issues with the merchant community.”

The settlement is pending before Judge John Gleeson and Magistrate Judge James Orenstein in the United States District Court for the Eastern District of New York.

Due to the overwhelming replies and inquiries VMS-Washington wants to help your business out by giving you rock bottom rates for your processing.  We also can help your business by giving you great rates for unsecured business loans with an 90% approval rate for start-ups and existing businesses.  Call or email us if you want to know more.

Michael Roberts

(800) 531.8575 ext. 697

VMS-Washington – What is the Durbin Amendment?

An Overview of the Durbin Amendment

The Durbin Amendment is an addendum to the Dodd-Frank Financial Reform and Consumer Protection Act passed by Congress in 2010. Its namesake, Senator Richard Durbin from Illinois, wrote the plan to expand Federal Reserve powers for setting interchange fees related to debit card transaction processing. In setting the fees, the ultimate goal is spur economic growth with lower fees. Theoretically, retailers could lower prices on consumer goods with the savings on paying high fees to big banks. Lower prices might help to increase consumer spending.

The rules of the Durbin Amendment would cap the interchange fee for debit card transactions. Generally, interchange fees are charged by retailers for each payment accepted with a debit card or credit card.Before the passage of this amendment, the average charge from banks to retailers per transaction was 44 cents. According to the Federal Reserve, banks collected nearly $16 billion annually on these fees to cover fraud prevention and administrative costs. Beginning October 2011 – when the new law goes into effect – the charge will cap at 12 cents.

For retailers, this appears to be an advantage in reducing the amount of bank charges. However, some note that banks will look for alternatives to the revenue loss. Consumers could end up paying the price, literally and figuratively, for the lost revenue.

Additional Provisions in the Durbin Amendment

The Durbin Amendment only affects banks that have less than $10 billion in assets.

Retailers have a choice in selecting a debit network service to process the transactions. Before the new law, retailers could only use the STAR network to process Visa transactions. This was required even if other merchants charged less.

Retailers can give discounts to consumers who pay with a debit card or in cash. Merchant agreements for both Visa and MasterCard currently ban this practice to encourage credit card use.

Problems with the Durbin Amendment

Critics observe the looming problems with the Durbin Amendment, despite its positive provisions.

Because credit cards remain unregulated, banks may choose to increase incentives such as rebates and reward points to entice more spending with credit cards. Consumers may see an advantage to using credit cards versus a debit card to earn the incentives.

VMS-Washington – What is the Durbin Amendment?

Currently there there are restrictions on banks for requiring minimum purchases with debit cards, however fears do exist that with this new legislation that many banks may try and change this. For example, banks could decide to cap debit card purchases at $100, limiting big ticket purchases. Instead, consumers will be forced to use a credit card, prepaid debit card or cash. Purchases are limited for consumers who have bad credit and no credit card.

Smaller banks not directly affected by the Durbin Amendment could suffer revenue losses. Market forces might require small banks to lower rates to remain competitive.

Another problem is banks may transfer the fee to consumers to offset revenue losses. One way this could occur is by changing the terms for free checking accounts. It is possible that banking competition will prevent such changes.

How the Durbin Amendment Impacts Small Businesses

For all of its intentions to improve economic activity, this legislation will impact small businesses in several ways.

Most small businesses pay more to provide discounts than for debit interchange fees. This leaves most at the mercy of a pricing strategy. A tiered system with a merchant service company could cost more.

Small businesses could realize very little in actual savings proposed by the Durbin Amendment. For example, merchant services may have a coded system that equates to other fees such as down-grades and hidden mark-ups.

In essence, small businesses may not see any savings initially because of blended contract agreements. The net effect is that consumers who purchase from these businesses will not see any savings. Small businesses that currently do not accept debit card payments would not see any savings.

If banks raise banking fees, they may include small business checking accounts. Nearly 15 million small businesses have active checking accounts. It is estimated that small businesses could pay as much as $4.8 billion in higher fees during the two years after the Durbin Amendment is implemented.

Many small businesses will need to analyze their debit card transactions. This could help to determine whether savings is possible with their current provider, or if switching to one with lower fees is worthwhile. What works for one small business may not benefit another based on the payment card consumers use.


The Durbin Amendment was passed to increase economic activity among consumers and small businesses. The interchange fees enforced by the Federal Reserve could add more cost than savings to both groups. Market competition may drive banks to shift the lost revenue onto small businesses and consumers.

VMS-Washington – What is the Durbin Amendment?

Larger businesses may benefit more from the reduced interchange fees and have more flexibility to pass those savings onto consumers. However, the law allows small businesses to select its merchant service for transactions. This provides more options in providing a merchant service provider with reasonable fees.

A big key here is that it still falls the each small business to ensure they are saving money with the new legislation. Make sure when you call your current credit card merchant account provider or the one you are thinking about signing with, that they are aware of Durbin and have adjusted their pricing to pass on these savings. If the representative can not quickly speak to how they adjusted their prices, or worse seems confused as to what the Durbin Amendment is, then it likely means you should find a different merchant service provider to work with.

Due to the overwhelming replies and inquiries VMS-Washington wants to help your business out by giving you rock bottom rates for your processing.  We also can help your business by giving you great rates for unsecured business loans with an 90% approval rate for start-ups and existing businesses.  Call or email us if you want to know more.

Michael Roberts

(800) 531.8575 ext. 697

Dow Jones Newswires’ Andrew R. Johnson is giving as a detailed overview of what U.S. credit card companies have been up to on Facebook, Twitter and other social networks in an excellent piece for the WSJ. There is a lot to be learned there, not least the fact that Capital One has made it possible for FarmVille players to interact with a goat. But Johnson’s reporting is actually focused on a rather less glamorous issue: the issuers’ use of social media as a way to circumvent regulatory restrictions on the marketing of credit cards to consumers under the age of 21. I can’t help but get away with the feeling that Facebook and Twitter have become enablers in a fiendishly clever plot to arm our young with credit cards.
Johnson doesn’t offer any suggestion on how to deal with the issue, nor is he citing anyone who does, so I thought I’d throw my two cents in. The CARD Act is doing a good job of ensuring that no credit card is issued to anyone under the age of 21 who can’t afford it. Making it even more difficult for youngsters to get a credit card would only serve to penalize those among them who are responsible with credit. Moreover, in our society at some point everyone needs to start learning how to manage debt. It is the parents’ responsibility to get that process started, but if they fail to do so or if such an option is unavailable, the learning curve will still need to start somewhere. So I don’t see how placing even more regulatory hurdles will do any good.

What Are the Issuers up To?

Johnson is giving us the following examples of how the issuers are testing the social waters:

Actually, there is a lot more, so go read the article. I have to say that I do like many of these campaigns. We’ve reviewed both Citi’s socialized rewards project and American Express’ sync program on this blog and have only had positive things to say about them. If you had a Citi or AmEx credit card, you could only gain from participating in these programs; there is absolutely no downside associated with either of them. So what’s the issue?

How Much Protection Is too Much?

As Johnson says, what gets some people concerned is precisely the fact that some of these social initiatives are incredibly attractive and “may give lenders another door around rules that took effect two years ago aimed at protecting young consumers.”
The rules in question are the restrictions the CARD Act of 2009 imposed on the issuers’ ability to market credit cards to people under the age of 21 and the requirement that lenders prove that the youngsters have the means to repay the debt or otherwise get a cosigner, before they can get approved for a credit card. I think that’s a great piece of legislation. It bars the issuers from setting shop on college campuses and prevents them from giving cards to those who can’t afford them. Isn’t that enough of a protection?
Short of banning credit card companies from promoting their products on Facebook and Twitter altogether, I just don’t see what we can do to prevent youngsters from getting exposed to them. But if we did that, we would also have to ban them from airing TV and radio ads. Where would we stop? More importantly, would that help?
Whether or not college kids were exposed to credit card marketing of one kind or another, they would have to eventually start dealing with them in real life. And they’d better be prepared to do so, because any misuse may haunt them for years to come. And it seems to me that that’s what we should be focusing on, not on how to make it more difficult for issuers to interact with us.

The Takeaway

As anyone who pays his outstanding balance on time and in full each month will tell you, credit cards can actually do great things for you. The social media initiatives mentioned above offer some examples, but there are better ones. As we wrote just yesterday, credit card rewards are now better than ever and issuers are falling over one another to attract new customers, offering sign-up bonuses that in some cases are worth more than $1,000. Of course, such bonuses, as well as the best rewards programs are reserved for the most creditworthy consumers, but that’s precisely the point. Rather than trying to push issuers out of our sight, which is in any case a losing proposition, our goal should be to take advantage of what they have to offer and that can only be done through education. Of course common sense always helps too.

(Reuters) – The Senate, eager to notch an election-year victory by boosting small business growth, is moving toward prompt passage of a measure that overwhelmingly passed the House of Representatives last week.

Senate Majority Leader Harry Reid, a Democrat, said on Tuesday he would avoid a prolonged debate and accept the legislation that passed the Republican-controlled House by a vote of 390-23 last week.

The bill aims to encourage job creation by making it easier for small firms to raise capital. But it is not expected to make a major dent in the high U.S. unemployment rate.

“We’re not going to have a knock-down, drag-out fight” on the measure, Reid said on the Senate floor. “If everybody loves the House bill so much, that’s what we’re going to vote on.”

Later, asked by a reporter why Democrats were abandoning their plan to introduce their own jobs bill, Reid cited practicality. “I think a (House) vote of 390-23 was fairly very significant in my thought process,” he said.

The move could also disarm Republican criticism that Democrats were delaying approval of the House jobs bill, at a time when millions of people are unemployed and the national jobless rate is 8.3 percent.

Senate Republican leader Mitch McConnell has warned that if Democrats drafted a “contentious” version instead of taking up the House bill, they would be sending two messages:

“First, that they’re just not serious when they say they’re focused on jobs. And second, that they’d rather spend their time manufacturing gridlock to create the illusion of conflict.”

With Congress facing near record low approval ratings, both parties are eager to convince voters they are working to aid the economy’s recovery.

However, much bigger measures aimed at job creation have stalled in the chamber and moderate Republican Senator Olympia Snowed announced last month she would not seek a fourth term because she was weary of the dysfunction paralyzing the chamber.

The House-passed bill would make it easier for firms to solicit private investors and relax filing requirements associated with initial public offerings.

A senior Senate Democratic aide said Reid will likely try to add an amendment that would reauthorize the U.S. Export-Import Bank, something Republicans have opposed.

If the amendment fails to get folded into the bill, the Senate will still move to pass the overall legislation this month, the aide said.

The Ex-mi Bank, established in 1934 by President Franklin Roosevelt, provides financing to U.S. exporters to make sales that are viewed as too risky by private banks.

Its charter is generally renewed for four or five years at a time, but the bank has been operating on temporary authority since October, and has run afoul of Republicans who have branded its mission as “corporate welfare.”

(Reporting By Alexandra Alper and Richard Cowan; editing by Tim Dobbyn and Todd Eastham)

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The amount of debt that’s being carried by certain consumers in this country is growing by about $2,800 a second.

It’s not mortgage debt, and it’s not credit card debt. Those are two financial time bombs we’ve (kind of) gotten a handle on, by some analysts’ reckoning. No, this credit menace is student loan debt, which is pushing $1 trillion, according to, a site dedicated to college financial aid information that has created a “Student Loan Debt Clock” where, if you like to be uncomfortable, you can watch this debt as it piles up, at a rate FinAid pegs at around $2,800 a second.

Potential ripple effects are numerous, including whether a generation will be able to buy homes, said Rick Palacios Jr., senior research analyst for John Burns Real Estate Consulting, an Irvine, Calif., company that analyzes social and economic trends for the housing industry. He talked about how the burden of student loan debt is likely to put homeownership out of reach for many grads.

Q: How much student loan debt is out there these days?

A: The Federal Reserve Bank of New York recently revised a lot of its data, and it announced it had been understating student loan debt by a couple hundred billion dollars. Where the Fed thought in the second quarter of 2011 that student loan balances were $550 billion, it now estimates that the number in the second quarter was $845 billion. That’s greater than all of our outstanding credit card debt and other types of household debt, except for mortgages. And it’s growing at a ridiculously high level. College students who graduate with loan debts carry an average balance of $25,000.

One thing that caught my eye (in the New York Fed data) is the way that student loan debt is categorized. It doesn’t capture anything that would be put on credit cards or on home equity loans that we know parents take out to pay for education. So the amount of school-related debt is probably bigger.

Q: How will this affect the country, demographically?

A: If you look at the census data that they’re slowly releasing, one of the things that we’re starting to see is that student debt is having an impact on household formations — the decision to get married and have children. They’re putting off forming households.

Q: And, in turn, how does that affect the future of housing?

A: In the age group of 25- to 35-year-olds, which is a prized demographic for the housing business, you’re going to be saddled with a lot more debt than you would have a decade ago coming out of college. They’re a big group, and they’ve moved back with their parents; almost 6 million in that age group now live with mom and dad, up 26 percent from the beginning of the recession in 2007. Many others are renting.

But certainly, few are buying. The homeownership rate for people 25 to 29 is at its lowest level since 1999, and for 30- to 34-year-olds it’s the lowest rate in 17 years.

This will be a boon for the rental market. It will take these people a lot longer to qualify for a mortgage.

Q: In the fall, President Barack Obama issued an executive order to put further caps on how much these debtholders of federally backed loans must repay each year, reducing it from 15 percent to 10 percent of their discretionary income. Won’t that help?

A: That shaves off a fraction, which is good. But I don’t think it’s going to make a huge impact. Given the tight mortgage-underwriting standards, I doubt that many of them would be able to qualify to buy a home with that much debt obligation.

Another aspect of that, which has gotten some publicity during the Occupy protests, is the default rate on these loans. Some of the protesters said they were angry with the high cost of obtaining an education and said they weren’t going to pay back their loans. Well, student loan default rates are going up: At private institutions, the rate is 4.6 percent; at public schools, it’s 7.2 percent; and at for-profit institutions, it’s 15 percent. Once that blemish is on your credit record, you can’t escape that.

Q: Eventually, both the parents and their adult children will be weary of this doubling-up trend, and even if the offspring can’t buy, they’ll rent. Is there an adequate apartment supply to meet the demand?

A: Yes, rentals will be the obvious beneficiary. We think the apartment supply will be adequate, and there’s a lot of supply in the pipeline right now.

And, of course, in the doubling-up situations, eventually you do reach a boiling point — both parent and child do — but the economics of it will still make it difficult for them to move out.

We haven’t done much research, as far as what types of housing builders should be building to meet their rental needs — whether, say, they should build more three-bedroom apartments for roommate situations, or maybe studios for those who will be on their own.

But one thing we’ve seen in recent quarters is the number of builders who are offering more of a multigenerational home (for purchase), for parents who may be living with 20- to 30-year-olds. Where builders are constructing those, those homes have been outperforming in their markets.

And I believe that we’re seeing more parents helping out their kids with down payments; that might be a way to get them out of the house.

Why hasn’t your processor mentioned the Durbin Amendment?  Learn how to lower your card acceptance cost: and ask about the Durbin Amendment that was passed on October 2011 and how it will help you lower your rates.