I e-mailed this note today to Andrew Martin, a New York Times reporter, in response to a story he wrote about credit card companies and the crazy transaction fees they charge retailers. They really are robbing the nation blind.
Can you tell it's a personal issue for me?
I hope he reads it.
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Hi Andrew, very nice story today on the interchange fees.
May I suggest a follow-up about another major way in which VISA/MC have retailers by the **lls? Credit card fraud. If someone charges a stolen credit card and the real cardholder files a dispute with VISA/MC, the cardholder is reimbursed -- no questions asked. Who takes the hit for this unconditional guarantee? The merchant.
VISA/MC automatically "charges back" the fraudulently charged amount, ie. takes it from the merchant's bank account. Unless a very specific set of conditions are met (positive photo ID, verified signature) -- and think of how many hundreds of thousands of Web and phone transactions happen daily without those safeguards -- there is little room for argument and no forum for recourse. Short of small claims court, and what merchant has the time for that?
Basically, VISA/MC lulls consumers into feeling safe and using their cards as much as possible in order to engender tons of transaction fees. VISA/MC have little incentive to fight credit card fraud, because that would make transactions harder and more time-consuming (ie. fewer transactions, less revenue from fees). Instead, they ignore the problem and simply shift the costs of fraud onto the backs of small businesses.
The worst part is that VISA/MC make all these universal "rules" that are very hard to understand, both for consumers, small businesses, and Congress. So they're not scrutinized and regulated in a way that makes it fair for all participants.
Why not just stop accepting credit cards, you say? That's simply not feasible for most merchants in this day. Credit cards are a part of life. It would be like telling a commuter in NY, don't ride the subway. But if you do ride the subway, you are liable for anything that may happen to you on it. Because you chose to take the ride.
Hope you're interested enough to look into this.
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You are right on target. But what you neglected to mention was that not only does the merchant loose the product and the money, including shipping, they also have to pay a chargeback fee of $15-$40. In essence, the merchant is fined for being the victim of crime. And of course the card doesn't need to be stolen. The customer can get the goods, say he didn't, and the merchant is stuck.
Your mention of the regulations didn't go far enough. Merchants are expected to comply with all the regulations, and that's OK; we know that going into it. The problem is that if we ask for copies of the regulations, we are refused access to them.
The truly sad part is that on-line merchants pay higher interchange rates "because of the higher risk of fraud" and yet the merchant eats all the losses.
Tom Mahoney, Director
Merchant911.org
Over 3900 merchants united to protect
themselves against credit card fraud.
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