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An Uproar on the Web Over $2 Fee by Verizon

December 30, 2011 by Leave a Comment

The $2 monthly fee, which takes effect Jan. 15, will apply to people who make one-time credit or debit card payments on the phone or online. Subscribers who write checks or have the company charge their credit or debit cards or deduct from their bank accounts each month will not have to pay the new fee.

But Verizon customers nonetheless flooded Twitter with denunciations of the company, setting up online petitions and vowing to use paper to cost the company more money than it would raise through the new fee. Others noted that the people who tended to pay at the last minute were often those who lived paycheck to paycheck.

The outsize reaction in many ways reflects the year that is now concluding. The economy has not improved much, consumers are fresh off their victory in getting Bank of America to rescind its own move to levy a small new monthly fee and airlines and other companies continue to ask customers to pay à la carte for goods and services that were once part of the standard price.

Then there was Verizon, making the announcement in the dead week between Christmas and New Year’s and calling its new charge a “convenience” fee.

“These fees are going to cover the costs of those last-minute payments,” said David Samberg, a Verizon spokesman. “We don’t want anyone to have to pay this.”

So how can customers avoid it? In addition to using a check, automated bank transfer and credit or debit card, Verizon customers can also pay at a Verizon store, by money order, or by using a bank or other company’s online bill payment service. They may also use a Verizon gift or rebate card, or make a last-minute, one-time phone or Web payment by handing over their bank account number and their bank’s routing number.

Verizon Wireless followed other Internet service providers, including Comcast, that have decided to charge fees to customers for certain phone payments. ATT, Verizon’s biggest rival, has not announced plans to impose charges for electronic payments and a company spokesman declined to speculate on whether it might do so.

Gerry Purdy, a principal analyst with MobileTrax, a market research firm, said it made sense that Verizon was charging for over-the-phone payments, because carriers typically must pay a third-party service to handle those transactions. But Internet payments do not require a third party, he said.

“That’s the one that surprises me, because most people won’t charge you for paying on the Internet,” Mr. Purdy said. “When you book a plane ticket online, you don’t get charged a fee.”

Verizon may be imposing a $2 fee on one-time online payments to pressure customers to enroll in an automatic payment option, Mr. Purdy said, because it creates a higher probability that the payments will come in on time.

Mr. Samberg would not say how many people would have paid the fee this month if it existed now. A study conducted by Javelin Strategy Research, a firm that focuses on financial services and payments, found that 23 percent of adults make a last-minute payment to a biller once a month.

Those who would pay it today are people like Grace Lusich, an administrative assistant in San Jose, Calif. She no longer has a bank account after bad experiences with what she believed were unfair overdraft charges. Now, she uses a prepaid debit card from Walmart called the MoneyCard.

“A lot of people in America who are having a hard time paying their bills need a little leeway to wait for the money to come in,” she said. She said she called Verizon each month once she knew her paycheck had been direct-deposited onto her card. Then she makes the payment without ever talking to a human being.

“If you go into their store and an associate helps you, they’re not charging you for that,” she said. “But with the phone, no one is helping me. It’s all automated. And they’re going to accept personal checks, which will cost them more in the long run?”

Mr. Samberg, the Verizon spokesman, said he did not have a breakout of Verizon’s costs for processing various payments.

Those one-time payments cost Verizon money since it must pay merchant fees to card companies and others. The amount it costs Verizon to accept cards in stores could be less because of quirks in how the card companies set fees. It may also be willing to swallow the costs of accepting cards in its stores in exchange for the opportunity to sell upgrades to people who come in to pay their bills.

“They are punishing people who need to wait until the last second,” said David O’Neill, who recently lost his job at a Borders bookstore that closed. He is a former Verizon Wireless customer but took to Twitter anyway on Thursday to argue that the company’s move helps the 1 percent get richer, since it rewards Verizon shareholders.

“We hope it’s not the case that people are forced into paying this,” said Mr. Samberg. “You look at all of the options and choose the one that is best and easiest for you.”

Article source: http://feeds.nytimes.com/click.phdo?i=684d91999152cc71e5b26d23e5bb6077

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Bank of America Drops Plan for Debit Card Fee

November 2, 2011 by Leave a Comment

The bank, the nation’s second-largest, said it was abandoning its plan to charge customers a $5 fee to use their debit cards for purchases. Only a month earlier, the bank had announced the new charge, immediately setting off a huge uproar from consumers.

Despite an outpouring of complaints online and at branch offices, the bank had remained steadfast in its plans until last Friday, according to a person briefed on the situation, planning to ease just some of the conditions for avoiding the fee. But over the weekend, after two major competitors — Wells Fargo and the nation’s largest bank, JPMorgan Chase — said they were backing away from their plans to levy similar charges, two high-ranking Bank of America officers recommended to Brian Moynihan, the bank’s chief executive, that the bank simply drop the fee.

Then, on Monday morning, when SunTrust, a regional bank in Atlanta, said that it, too, would abandon its $5 charge, Bank of America was left standing alone, the last major bank planning the fee. The announcement came on Tuesday.

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, co-chief operating officer at Bank of America, said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

The revenue the bank expected to raise from the debit fee was not worth the damage to its reputation, the person briefed on the matter said.

The bank never disclosed how many of its customers would have been affected by the fee. It also declined on Tuesday to comment on how many had closed their accounts after the original announcement, but sources close to the bank said that account closures were higher than usual. And smaller institutions like PerkStreet said that their account acquisition rate had spiked in the days afterward.

Besides Wells Fargo, JPMorgan Chase and SunTrust, Regions Financial has also said it would roll back its debit fee as of Tuesday and reimburse customers for any charges incurred.

All along, though, Bank of America took the brunt of the criticism, and apparently, it was not just the debit fee that caused consumers to lash out. For Grace Anderson, of Madison, Wis., the bank’s recent decision to cut 30,000 job positions had prompted her to close a checking account. “I cannot in good conscience invite them into my house and my life,” she said, adding that she had moved her account to USAA, a federal savings bank.

The new fees were part of an effort by the banks to raise revenue lost elsewhere. On Oct. 1, a new federal rule went into effect that limits the fees banks can levy on merchants every time a consumer swipes a debit card to make a purchase. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which were widely seen as onerous and went into effect in July 2010.

Now that all the large banks have decided not to impose the debit fee, experts said, they will find other ways to fill the hole. “Those revenues paid for a lot of things,” said Joe Gillen, chief executive of Pinnacle Financial Strategies, a bank consultant in Houston.

Now, he said, consumers can expect more fees over time. “It will be slow and gradual, but they will bring those revenues back,” Mr. Gillen said.

What he said was most frustrating, however, was that the banks were penalized for their openness. The fees the banks were trying to replace — the so-called swipe fees — were not readily apparent, even though all consumers were ultimately paying them in higher costs at the cash register. Now, Mr. Gillen said, the banks “are going to have to hide the fees and the customers will still have to pay them.”

But those customers may have found their voice, which has been amplified by social media. “People can now use tools like Change.org, Facebook and Twitter to rapidly organize and collectively act to influence the policies of even the largest companies,” said Ben Rattray, founder of Change.org, which allows consumers to start grass-roots campaigns using its online platform.

He pointed to Molly Katchpole, a 22-year-old woman from Washington who collected more than 300,000 signatures opposing the fee by using his company’s platform. And then there is the grass-roots effort that is calling for this coming Saturday to be “Bank Transfer Day,” where customers of big banks move their accounts to community banks and credit unions.

Mr. Rattray and other consumer advocates said the outcry was about much more than fees. “Bank of America’s new debit card fee was the last straw for many consumers who are tired of banks that got bailed out that are now turning around and hiking fees,” said Norma Garcia, manager of Consumer Union’s financial services program. “There was this phenomenon with banks and others confusing passivity with loyalty. And consumers are saying, ‘You can’t take us for granted anymore.’ ”

Lawmakers also openly criticized Bank of America’s planned fee. Days after the bank announced that it would charge the fee, President Obama said customers should not be “mistreated” in pursuit of profit, while Vice President Joseph R. Biden Jr. called the move “incredibly tone deaf.” And Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, spoke out on the Senate floor, urging consumers to vote with their feet. He had sponsored the rule, known as the Durbin amendment, that limited the amount banks could charge for debit card transactions.

On Tuesday, he took to the floor again. “What we have at work here is a very fundamental principle of our economy, the free market economy, transparency,” he said. “So people know what they are being charged. So they have a choice.”

This article has been revised to reflect the following correction:

Correction: November 1, 2011

Because of an editing error, an earlier version of this article incorrectly referred to Bank of America as the nation’s largest bank. JPMorgan Chase has overtaken Bank of America in assets, according to third-quarter results released in October.

Article source: http://feeds.nytimes.com/click.phdo?i=b5be0dd2641e092993355536e9125c38

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Bank of America Rethinking Debit Card Fee

October 29, 2011 by Leave a Comment

Although bank officials said their thinking was “evolving” and no firm conclusions had been reached, the bank is likely to broaden the number of customers exempt from the fee. Customers who hold Bank of America credit cards, directly deposit wages into the bank or hold a minimum balance will not be charged under a new plan. Previously, the bank said the minimum balance required to avoid the fee was $20,000, but lowering that minimum is also possible.

The hesitation at Bank of America comes as other banks are also pulling back, at least for now. Wells Fargo said Friday that it was canceling a test that would have imposed a $3-a-month charge on debit card holders in Georgia, Nevada, New Mexico, Washington and Oregon. JPMorgan Chase, which was testing a $3-a-month charge, has decided it will not impose a stand-alone debit card use fee, a person briefed on the situation said.

Bank of America officials were caught off guard after the planned $5 fee was disclosed late last month. Days later, President Obama said customers should not be “mistreated” in pursuit of profit, while Vice President Joseph R. Biden Jr. called the move “incredibly tone deaf.” Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat, took the unusual step of denouncing the bank on the Senate floor, urging customers, “Vote with your feet. Get the heck out of that bank.”

Despite the apparent change of heart, banks are likely to continue to find ways to make up for billions in lost revenue because of new federal regulations that sharply reduce the fees paid to the banks by merchants when consumers use debit cards. At the same time, other bank businesses, like lending and sales and trading, have been anemic.

Besides losing an estimated $6 billion from the reduction in the so-called swipe fees, the industry faces the disappearance of billions of dollars from the end of overdraft penalty fees.

Article source: http://feeds.nytimes.com/click.phdo?i=cc6e112d0071ab0d957d914bd3f9b5c1

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You’re the Boss Blog: In Battling Merchants, Banks Still Hope to Overturn Durbin Rules

October 17, 2011 by Leave a Comment

The Agenda

How small-business issues are shaping politics and policy.

The Durbin Amendment — the legislation that limits the fees banks can earn for debit card transactions to a scale that is “reasonable and proportional” — was signed into law more than a year ago. It survived the financial sector’s strong objections to the Federal Reserve’s aggressive first swing at regulating those fees, as well as subsequent efforts in Congress to delay adoption of the new rules. Those new rules, which were eventually watered down in a compromise that left advocates fuming, took effect Oct. 1.

Even so, opponents persist. Last week they rallied behind a pair of junior representatives, one Republican and one Democrat, who on Tuesday introduced a bill to turn the clock back on interchange fees. “The Durbin Amendment is an affront to consumers and the banking industry,” said Rep. Jason Chaffetz, a Utah Republican, in a news release. “These legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue.”

In late September, with the new rules about to take effect, Bank of America announced that it would begin charging a fee to consumers who use debit cards. Wells Fargo and Chase are also testing debit card fees. “Congress must repeal this egregious provision that increases the costs of doing business on everyone,” Mr. Chaffetz said. Rep. Bill Owens, a Democrat from New York, joined Mr. Chaffetz as a co-sponsor.

It’s unclear whether Mr. Chaffetz’s bill will ever see a vote, however. In the past, Representative Spencer Bachus, the Alabama Republican who chairs the House Financial Service Committee, has suggested that revisiting the Durbin Amendment was a low priority and that he would wait for the Senate to act first. This summer, the Senate did not even support delaying the Durbin Amendment, much less repealing it.

What’s also unclear is how much most merchants will benefit from the Durbin rules, should they withstand this latest assault. Opponents to limits on these swipe fees, as they’re called, often claim that merchants will pocket the savings on the reduced fees instead of passing them on to consumers. Lately, The Agenda has been hearing much the same suggestion about the banks and other organizations that process credit card transactions for merchants, companies that are technically known as “merchant acquirers.” In practice, it is the acquirer who collects a fee from the merchant, and then passes on the interchange fee to the card issuer and a separate assessment to the card network. The Durbin limits apply only to the interchange fee, not to the network assessment or the fee for the acquirer’s services. But it may be that only the biggest, most powerful retailers have the bargaining power to secure the promised savings.

That’s because large merchants use that bargaining power to negotiate transparency into the fee agreements they make with acquirers. In these arrangements, commonly known as “interchange plus,” the acquirer identifies the interchange and network fees and simply adds its own charge to them. With interchange plus, it would be very difficult to disguise a change in the interchange rate. “When interchange is passed through, merchants benefit from a lower interchange rate,” said Lee Manfred, a partner with First Annapolis, a payment industry consulting group.

However, for most smaller merchants — indeed, for most merchants over all — the interchange fee is concealed within a negotiated rate, Mr. Manfred said. Most common is a tiered pricing plan with different rates for different types of transactions. These merchants won’t necessarily benefit from the Durbin rules, Mr. Manfred said, because the interchange rate isn’t separately identified, “and their acquirer may attempt to capture some of that interchange reduction in their own profits rather than passing that on.”

Still, even small merchants should insist on interchange-plus pricing when negotiating with an acquirer, said Sean Harper, chief executive of FeeFighters, an online service that lets acquirers bid for small merchants’ business. Though you might not always get it, and though some companies that purport to offer it will sometimes attempt to mark up the interchange rate, he said, “you’re much better off asking for interchange plus. They may still try to trick you, but they’ll have a different perception of you.”

Over time, Mr. Harper added, even businesses that pay opaque transaction fees will see those rates decline as acquirers poach each others’ customers. “It’s just going to be part of the sales pitch,” he said. (Indeed, it is already part of Mr. Harper’s sales pitch. And he is hardly alone: see, for instance, this news release from Heartland Payment Systems, one of the largest acquirers.)

“Merchant acquiring is a very competitive industry, and it’s likely that any merchant that acquirers retain in the short term will be competed away over time,” Mr. Manfred said. And as they do, he continued, prices will fall.

Article source: http://feeds.nytimes.com/click.phdo?i=a10450b0ea654a27c7714b02dca6657d

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Bucks Blog: Bank of America Debit Fee Inspires Protest

October 14, 2011 by Leave a Comment

Associated Press

An online petition started by a young Washington, D.C., woman opposing Bank of America’s new $5 a month debit-card fee has attracted more than 200,000 supporters — and, according to the organizer, a personal call from a bank executive.

Change.org, the Web site where Molly Katchpole, 22, started a petition this week opposing the fee, said in a statement that Ms. Katchpole got a call from Andrew Plepler, Bank of America’s social responsibility and consumer policy executive. According to the statement, Ms. Katchpole asked him if the bank would drop the fee and Mr. Plepler said it was “premature” to answer that question.

Later, a spokeswoman for the bank, Anne Pace, said in an e-mail: “We plan to implement the fee in early 2012.”

“Please, do the right thing,” the petition says. “Reverse your decision to charge customers $5 each month for using their debit cards to make purchases.”

Bank of America, along with other large banks, will soon add monthly fees to many accounts when customers shop with their debit cards. They have done this, they say, in response to federal caps on the amount banks can charge merchants for processing debit-card purchases. Bank of America said it would start charging the fees on some accounts starting in January, prompting an outcry from customers.

Recently, Netflix reversed course on a change in its service after a wave of consumer outrage.

Article source: http://feeds.nytimes.com/click.phdo?i=083476a2dba0a02c2b68d0c6111b69ff

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Bucks Blog: ING Direct’s Paperless Account Now Offers Paper Checks

August 18, 2011 by Leave a Comment

Even as payments become increasingly electronic, the need for paper checks persists. Just ask the folks at the online bank, ING Direct, which touts its Electric Orange checking account as “paperless” — but which just began offering its customers the option to use, well, paper.

Todd Sandler, the bank’s head of product strategy, said the bank wasn’t encouraging the use of paper checks. “Our hope is that paper checks go the way of the abacus,” he said.

But some smaller merchants and local groups — your local parent-teacher association, for instance — still don’t accept debit card payments, so even bank customers who are very technology savvy sometimes need to get out the pen and checkbook.

The paper-check option, Mr. Sandler says, was a missing element holding some customers back from ditching other bank accounts and using ING Direct alone. So last week, it began offering its customers the option of ordering paper checks. (Mr. Sandler said the change isn’t related to the deal for Capital One to acquire ING Direct.)

“Our customers don’t want paper checks,” he said. “But they actually need them.”

A recent Federal Reserve study found that check payments declined 7 percent between 2006 and 2009, while the use of debit cards rose by 15 percent. Checks now comprise less than a quarter of all non-cash payments, the study said—but that still means billions are used each year.

ING Direct already offered a “mail a check” option, for recipients who don’t accept electronic payments. This allows customers to log on to their ING Direct bank account and fill in payment information electronically. The bank then mails a check to the recipient.

Now, ING Direct customers can buy their own checks from the bank, at a cost of $5 per book of 50 checks. The bank has added some security features to make the use of paper checks more secure, he noted. For instance, when customers receive their checkbook, they must go to their online account and activate the checks—much like the process for activating a debit card. That, Mr. Sandler says, assures that no one can fraudulently order checks with your account number.

And yes, now that it offers paper checks, Electric Orange will also charge bounced-check fees. But the fee is just $9 —a fraction of the $35 fee typical at most large banks. The fee is charged if the check exceeds the account’s available balance, including its available overdraft line of credit.

What bills do you still pay using paper checks? And would you stop if the biller would accept some other form of payment?

Article source: http://feeds.nytimes.com/click.phdo?i=bd98a7e57c373039f89ac6687e24c684

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Bucks: Credit Cards That Offer Savings at the Pump

June 17, 2011 by Leave a Comment

Lucy Nicholson/Reuters

The average price for a gallon of regular gas dipped this week, to $3.68, but that’s still high enough to hurt your wallet when you fill up the tank. Is it time to consider a credit card with gasoline purchase perks?

It’s true that you may pay less at the pump if you use cash, but credit cards are convenient, which is why most customers use them. If you choose carefully — and pay off your balance on time and in full each month — gas rewards cards save you a bit of money. It’s generally a good idea to use credit cards instead of debit cards at the pump because it’s usually easier to contain any financial damage if the number is “skimmed” by fraudsters, who often do their work at gas pumps during the summer months.

We checked several credit card comparison sites to see what sort of gas cards were currently available.

CreditDonkey.com recommends several cards, all without annual fees, based on the potential savings for an average family spending $50 a week ($2,600 a year) on gas. The Discover Open Road card is offering 2 percent cash back on gas, instead of the card’s base 1 percent on everyday purchases. The card is also offering an introductory bonus of $10 cash back on each of your first five fill-ups of $25 or more, in the first 90 days. That totals $102 in savings for the first year.

CreditDonkey also cites the BP Visa Card, which gives 5 percent back on all gas purchases at BP stations, or $130 at the end of your first year. Also worth a look, if you don’t mind a more complex structure, is the Chase Freedom Visa Card, offering 5 percent cash back on up to $1,500 in gas spending in July, August and September. The rewards are earned as points, which can be redeemed for cash. The card’s bonus categories, like gas and groceries, rotate every quarter according to a set schedule.

Both Creditcards.com and Cardhub.com like the Capital One No Hassle Cash Rewards card, which offers 2 percent back on gas and grocery purchases, without a spending cap. The card carries a zero percent interest rate good until June 2012. As an added perk, you can choose the images you want to appear on the card.

The sites also mention the True Earnings Card from Costco and American Express, which is free for Costco members. This card offers 3 percent cash back on gas and restaurant spending of up to $3,000 a year.

Do you think cash back incentives make gas cards a good deal?

Article source: http://feeds.nytimes.com/click.phdo?i=77327c40c897e6494f1a00e37baf12a6

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Bucks: Debit Card Fees to Fall, but Will Consumers Benefit?

June 8, 2011 by Leave a Comment

After weeks of back-and-forth debate and heavy lobbying by banks and retailers, the Senate voted Wednesday against delaying a cap on the swipe fees that stores must pay for the processing of debit card purchases.

The vote means that the Federal Reserve Board will move ahead to complete the cap on the charges, formally known as “interchange” fees, by July 21. The board has proposed rules that would limit the fees charged by banks to 12 cents per transaction, down from the current average of 44 cents per transaction.

What remains to be seen, however, is whether the savings will be passed on to shoppers.

The country’s biggest banks, which earn billions in revenue from the fees, fought hard for a delay or an outright repeal of the cap, which is part of the Dodd-Frank financial regulation law. They’ve warned that they will have to curtail rewards programs and other customer perks, and perhaps generate fees elsewhere, to make up for the lost interchange revenue.

Retailers fought hard to lower the fees.

Consumers, at any rate, have low expectations of receiving any benefits from the change, said Paul Bragan, director of quantitative research at Wakefield Research, which has tracked public opinion on the interchange debate since 2008.

Wakefield’s latest findings show that consumers and voters are much smarter about how debit cards work, and that they’re skeptical that merchants will pass along the savings they get from the new law. “They don’t believe that they’re going to see a benefit when they go to the store,” Mr. Bragan said. In fact, nearly three-quarters of those polled agreed that the prices they pay would not be reduced by merchants and retailers.

What do you think? Is it unreasonable to expect that merchants pass along at least some of the savings to customers, in the form of lower prices at check out?

Article source: http://feeds.nytimes.com/click.phdo?i=613b54e0dd35a0c5c1fc71f4fedf3a8d

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Bits: Sony Finds More Cases of Hacking of Its Servers

May 3, 2011 by Leave a Comment

Sony said Monday that it had discovered that more credit card information and customer profiles had been compromised during an attack on its servers last week.

In a news release issued by Sony, the company said that it had discovered hackers had gained access to the Sony Online Entertainment servers, which contain approximately 24.6 million customer accounts and 12,700 credit card and debit card numbers. Sony said the hackers might have stolen this information, but the company could not be sure.

Sony Online Entertainment is a division of Sony that creates multiplayer online games for the PS3 and PlayStation Portable gaming platforms.

The announcement of more compromised customer information was another black eye for Sony, which is facing international pressure to answer questions about the attacks on its servers, and to disclose exactly how many customers were affected by the breach.

Congress has asked Sony to respond by the close of business Tuesday to several questions related to the attacks.

Sony said it had decided to shut down the Sony Online Entertainment servers and Web site so it could upgrade its servers and add more protection to the service.

Sony also noted that information taken from the entertainment division of the site included customers’ names, addresses, e-mail addresses, birth dates, phone numbers and usernames and passwords. It also said that 10,700 debit cards from users in Austria, Germany, Netherlands and Spain were compromised.

Article source: http://feeds.nytimes.com/click.phdo?i=8d37e1c692cdf0218e3d30700b043443

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