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Discussion Starter · #1 ·
Credit or debit? This might be the last Christmas you get to make that choice. Under new proposed regulations released by the Federal Reserve pursuant to the Dodd-Frank financial regulation bill. The check-out process generally goes so smoothly that we don’t even think about it, but these regulations could create upheaval that undermine both the economics of the payment card industry and the practical experience of completing a retail purchase.

The provision that would take away the choice of credit or debit is labeled “transaction routing” and shreds the legitimate private contracts that Visa and MasterCard have with merchants that assure customers the ability to choose how their transactions are processed.

The Fed proposes: “The Board proposes to prohibit issuers and payment card networks from restricting the ability of a merchant to direct the routing of electronic debit transactions over any of the networks that an issuer has enabled to process the electronic debit transactions.”

That means merchants will be allowed to take the “credit or debit” choice away from customers – even though the contracts they agreed to with card networks guaranteed consumers that choice. They can force your transaction onto a network that may not offer fraud protection services or any of the other extras that come with using a brand-name network like Visa or MasterCard.

In effect, the federal government is tearing up legitimate contracts – that have served consumers very well – to allow merchants to choose “credit or debit” for us, based on what’s best for them. It is terrible news for consumers who rely on the value-added features of their cards that are only available when transactions are routed over credit networks, including fraud protection, a better audit-trail including a signature, and other features like integrated lines of credit and transaction-timing flexibility offered by some banks and credit unions.

The new regulations also impose explicit price controls on all debit transactions, limiting the fee charged for each transaction to 12 cents, based on the Fed’s calculation of what Dodd-Frank calls the “incremental cost incurred” by the bank or credit union that issued your card. It’s a huge, 90 percent or so cut from the existing, market-based transaction fees, which might sound like great savings for customers.

But government cannot make things less expensive by imposing price controls without serious consequences, as we should have learned from Nixon-era wage-and-price controls. When prices are artificially suppressed, the consequence is a precipitous drop in supply. In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate. They are also starved of cash for more routine operational expenses like staffing call centers. Free checking and other attractive banking services could also disappear.

These severe price controls, combined with the new routing power given to merchants, are designed to destroy the “credit” option and force all debit card transactions onto generic debit networks that don’t offer meaningful fraud protection, reward points, or other valuable services. And new ultra-cut-rate debit providers may move in to take advantage of the new regulations, putting consumer financial information and privacy at risk.

The bottom line is Congress needs to repeal debit card provisions of Dodd-Frank before these misguided regulations take effect. Otherwise next Christmas’s check out experience could be a nightmare.

Mr. Kerpen is vice president for policy at Americans for Prosperity.


Read more: http://www.foxnews.com/opinion/2010/12/16/credit-debit-fed-away-right-choose/#ixzz18JqGvJyi
 

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I'm not worried about the banks. They still have the money we gave them out of the federal pot that was supposed to loosen their lending ability.
 

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Using federal legislation to address commercial problems(high prices, undue fees, etc) is like using a sledgehammer to swat a fly in a china shop. Its usually two slow and cumbersome to hit the target and if by chance they luck out and do accomplish the goal, the resulting damage is far worse than the original problem.
 

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Using federal legislation to address commercial problems(high prices, undue fees, etc) is like using a sledgehammer to swat a fly in a china shop. Its usually two slow and cumbersome to hit the target and if by chance they luck out and do accomplish the goal, the resulting damage is far worse than the original problem.
You are correct, sir. Our government believes we are all too stupid to run our own lives and make our own decisions. The only problem is, they haven't noticed that they are no better at running our lives than we are. I think voters are waking up and beginning to point that out at the polls.
 

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I think this article deals strictly with some debit cards that give you the option of credit or debit. This would make a debit card strictly debit and a credit card "credit" only.

so you carry two cards and you must pick before you put it in the machine. what is so hard/bad about that??
 

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Discussion Starter · #8 ·
I think this article deals strictly with some debit cards that give you the option of credit or debit. This would make a debit card strictly debit and a credit card "credit" only.

so you carry two cards and you must pick before you put it in the machine. what is so hard/bad about that??
Well, quit "thinking" and read the article, then you won't make another misinformed post.

:cheers:
 

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Well, quit "thinking" and read the article, then you won't make another misinformed post.

:cheers:
what is misinformed about my post?
The Fed proposes: “The Board proposes to prohibit issuers and payment card networks from restricting the ability of a merchant to direct the routing of electronic debit transactions over any of the networks that an issuer has enabled to process the electronic debit transactions.”
That means merchants will be allowed to take the “credit or debit” choice away from customers – even though the contracts they agreed to with card networks guaranteed consumers that choice. They can force your transaction onto a network that may not offer fraud protection services or any of the other extras that come with using a brand-name network like Visa or MasterCard.

That means merchants will be allowed to take the “credit or debit” choice away from customers – Like I stated only have a credit card for credit or a debit card for debit. that way if the merchant can't force them onto other networks (??) as stated or the transaction will revoke. and so you must chose before hand.

Only thing chosing after you hand them the card does-- could save you the embarassment of not having enough funds in your debit account to cover and them (on the DL) simply reswiping saying credit.

If you're concerned with the issues use only your credit card. the protections are from the bank-- not the transmission lines or merchant.
Then you pay your bill monthly or even weekly.

again I don't see the "big brother" taking away my rights argument??
 

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Discussion Starter · #10 ·
again I don't see the "big brother" taking away my rights argument??
Don't feel bad, the French didn't see the Nazi threat until it rolled into Paris in a tank... :crazy:

The new regulations also impose explicit price controls on all debit transactions, limiting the fee charged for each transaction to 12 cents, based on the Fed’s calculation of what Dodd-Frank calls the “incremental cost incurred” by the bank or credit union that issued your card. It’s a huge, 90 percent or so cut from the existing, market-based transaction fees, which might sound like great savings for customers.

But government cannot make things less expensive by imposing price controls without serious consequences, as we should have learned from Nixon-era wage-and-price controls. When prices are artificially suppressed, the consequence is a precipitous drop in supply. In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate. They are also starved of cash for more routine operational expenses like staffing call centers. Free checking and other attractive banking services could also disappear.

These severe price controls, combined with the new routing power given to merchants, are designed to destroy the “credit” option and force all debit card transactions onto generic debit networks that don’t offer meaningful fraud protection, reward points, or other valuable services. And new ultra-cut-rate debit providers may move in to take advantage of the new regulations, putting consumer financial information and privacy at risk.

The bottom line is Congress needs to repeal debit card provisions of Dodd-Frank before these misguided regulations take effect. Otherwise next Christmas’s check out experience could be a nightmare.

:cheers:
 

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Don't feel bad, the French didn't see the Nazi threat until it rolled into Paris in a tank... :crazy:

The new regulations also impose explicit price controls on all debit transactions, limiting the fee charged for each transaction to 12 cents, based on the Fed’s calculation of what Dodd-Frank calls the “incremental cost incurred” by the bank or credit union that issued your card. It’s a huge, 90 percent or so cut from the existing, market-based transaction fees, which might sound like great savings for customers.

But government cannot make things less expensive by imposing price controls without serious consequences, as we should have learned from Nixon-era wage-and-price controls. When prices are artificially suppressed, the consequence is a precipitous drop in supply. In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate. They are also starved of cash for more routine operational expenses like staffing call centers. Free checking and other attractive banking services could also disappear.

These severe price controls, combined with the new routing power given to merchants, are designed to destroy the “credit” option and force all debit card transactions onto generic debit networks that don’t offer meaningful fraud protection, reward points, or other valuable services. And new ultra-cut-rate debit providers may move in to take advantage of the new regulations, putting consumer financial information and privacy at risk.

The bottom line is Congress needs to repeal debit card provisions of Dodd-Frank before these misguided regulations take effect. Otherwise next Christmas’s check out experience could be a nightmare.

:cheers:
so congress is trying to enact controls on fees to the actuall cost of transmitting funds electronically? instead of allowing banks to charge the merchant 1-4% of the transaction cost in fees? Especially when the majority of the transaction electrons go over open networks? the banks don't own the transmission lines they use the same ISP or phone lines everyone else does.

and that's a bad thing? I know few merchants will ever pass on the savings to the customer but again what's the problem?

and for these complaints--In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate.

Has anyone checked out the cost of a TB of server now-- the costs are dropping significantly for everything-cisco routers, server farms you name it.

They are also starved of cash for more routine operational expenses like staffing call centers.

Maybe if every bank didn't have a brick and mortar location on every block they could afford better call centers!! look around how many BOAs do you pass on the way to work??

Free checking and other attractive banking services could also disappear.

Reward points are a thing of the past-- free checking is already gone unless you hold a certain balance or direct deposit. What other attractive options do banks offer? an atm on every corner? that busines model is a fail. now that even Mickey Ds takes cards who really carries a lot of cash around anymore?
 

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Discussion Starter · #12 ·
so congress is trying to enact controls on fees to the actuall cost of transmitting funds electronically? instead of allowing banks to charge the merchant 1-4% of the transaction cost in fees? Especially when the majority of the transaction electrons go over open networks? the banks don't own the transmission lines they use the same ISP or phone lines everyone else does.

and that's a bad thing? I know few merchants will ever pass on the savings to the customer but again what's the problem?

and for these complaints--In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate.

Has anyone checked out the cost of a TB of server now-- the costs are dropping significantly for everything-cisco routers, server farms you name it.

They are also starved of cash for more routine operational expenses like staffing call centers.

Maybe if every bank didn't have a brick and mortar location on every block they could afford better call centers!! look around how many BOAs do you pass on the way to work??

Free checking and other attractive banking services could also disappear.

Reward points are a thing of the past-- free checking is already gone unless you hold a certain balance or direct deposit. What other attractive options do banks offer? an atm on every corner? that busines model is a fail. now that even Mickey Ds takes cards who really carries a lot of cash around anymore?
If you don't get it, you just don't get it. :huh:

:cheers:
 

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so congress is trying to enact controls on fees to the actuall cost of transmitting funds electronically? instead of allowing banks to charge the merchant 1-4% of the transaction cost in fees? Especially when the majority of the transaction electrons go over open networks? the banks don't own the transmission lines they use the same ISP or phone lines everyone else does.

and that's a bad thing? I know few merchants will ever pass on the savings to the customer but again what's the problem?

and for these complaints--In this case, by arbitrarily capping fees at 12 cents, banks and payment networks will not be able to earn an adequate return on the enormous capital expenditures necessary to build, maintain, and innovate.

Has anyone checked out the cost of a TB of server now-- the costs are dropping significantly for everything-cisco routers, server farms you name it.

They are also starved of cash for more routine operational expenses like staffing call centers.

Maybe if every bank didn't have a brick and mortar location on every block they could afford better call centers!! look around how many BOAs do you pass on the way to work??

Free checking and other attractive banking services could also disappear.

Reward points are a thing of the past-- free checking is already gone unless you hold a certain balance or direct deposit. What other attractive options do banks offer? an atm on every corner? that busines model is a fail. now that even Mickey Ds takes cards who really carries a lot of cash around anymore?
Most credit card services are "non-recourse" meaning if the cardholder doesn't pay, the charge doesn't go back to the retailer. That means the credit card companies must absorb the bad debt. There is no way they can do that without charging a significant fee on each transaction ( the 1-4% you mentioned). Believe me, there are billions in unpaid credit card debt every year. We all pay for it through that fee.
 

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Most credit card services are "non-recourse" meaning if the cardholder doesn't pay, the charge doesn't go back to the retailer. That means the credit card companies must absorb the bad debt. There is no way they can do that without charging a significant fee on each transaction ( the 1-4% you mentioned). Believe me, there are billions in unpaid credit card debt every year. We all pay for it through that fee.
Good point. maybe it's time for credit companies to start giving only the credit worthy cards instead of anyone getting credit.
How did the system work back in the day? From what I remember if you didn't have the money you couldn't buy the item.

as for the banks-- got it- costs of doing business +profit keeps you in business. if they keep giving out credit to the unworthy the bank deserves to go under due to a bad management model..
 

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Good point. maybe it's time for credit companies to start giving only the credit worthy cards instead of anyone getting credit.
How did the system work back in the day? From what I remember if you didn't have the money you couldn't buy the item.

as for the banks-- got it- costs of doing business +profit keeps you in business. if they keep giving out credit to the unworthy the bank deserves to go under due to a bad management model..
Now I know at least two reasonable Texans..:cheers:

ZEP
 

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Good point. maybe it's time for credit companies to start giving only the credit worthy cards instead of anyone getting credit.
How did the system work back in the day? From what I remember if you didn't have the money you couldn't buy the item.

as for the banks-- got it- costs of doing business +profit keeps you in business. if they keep giving out credit to the unworthy the bank deserves to go under due to a bad management model..
Not only that, as a diehard Republican, the maddest I have been at Republican legislators in recent history was the the bankruptcy overhaul under Bush where credit card companies were protected in bankruptcy from elimination of their debt. This was an unconscionable sop to the banks at the expense of consumers who have cards pushed on them whether they can afford them or not. It makes my blood pressure go up just thinking about it. :down:
 

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Not only that, as a diehard Republican, the maddest I have been at Republican legislators in recent history was the the bankruptcy overhaul under Bush where credit card companies were protected in bankruptcy from elimination of their debt. This was an unconscionable sop to the banks at the expense of consumers who have cards pushed on them whether they can afford them or not. It makes my blood pressure go up just thinking about it. :down:
:agree:

but like me and VetteNewb have said....

Banks run this country.:down:
 
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