Editor's Simple Question:  Why don't retailers fight the good fight and switch over to PIN Debit?  It would save them millions on Interchange Fees, AND millions on Lawyers Fees.  Come to think of it, they would also save millions on fraud reduction and chargebacks.  In addition, PIN Debit is the  fasting growing and most preferred form of payment by consumers (and merchants) alike.  So it begs the question:


Why not just say, we don't take signature debit, we only accept PIN Debit?  Debit surpassed credit and PIN debit is growing at 4 times the pace of signature debit.  So why not align yourself with the Stars?

The irony is that one of the creators of the original Signature Debit platform, Mr. Thomas E. Honey, now sits on the advisory board of HomeATM.  He had no idea when he created it, that it would evolve into what it is today.  PIN Debit much more closely aligns with the original intent of the original check card. 

Today, signature debit not only costs more for the merchants to accept, it costs MUCH more for consumers to use.  As but one example, when you use your signature debit to make a $25.00 gas purchase,  your account can have a hold put on it for as much as $150...for as long as 3 days.  Meanwhile, even though you "think" you've got an "extra" $150.00 in your checking account, you don't.  It's frozen.  So when you use your signature debit card to 1. buy milk and eggs, then 2. A $5 Footlong and 3. a 6 pack of beer, you are hit with 1.2.3. "overdraft" charges to the tune of $35 a pop. 

With PIN Debit the money is paid in real-time so there are no holds placed on your accont and, in the scenario above.  you would've save $105 in overdraft charges.  So why fight the fight, just provide consumers with good reasons why they shouldn't be using their signature debit card.   Wouldn't it make more sense to switch to PIN Debit rather than fight with the providers of the less secure and less liked signature debit product?

Anyway, here's a quick blurb on that fight against high interchange. 

Interchange in federal sights - again

Retailers may have lost the battle over interchange when they failed to convince the U.S. Congress to add strong language about interchange to the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD act), which was signed into law in May. But they haven't given up the fight.

The Credit Card Fair Trade Act, HR 2695, was introduced June 4, 2009, by Rep. John Conyers, D-Mich., who is Chairman of the House Judiciary Committee.

The proposed bill would create a special exemption from federal anti-trust law so retailers could negotiate "access" to electronic payment systems en masse.  (Editor's Note: Why not negotiate the payment instrument with the consumer?)


The bargaining table

• HR 2695, which closely mirrors legislation approved by the House Judiciary Committee in 2008 but didn't progress further, would allow for a limited number of parties around the negotiating table, as follows:
• A representative of one of the 10 largest issuers, in terms of number of cards issued
• Someone representing one of the 10 largest acquirers, in terms of number of merchants served
• An executive from one of the 10 largest merchants, based on the total value of card payments accepted the previous year
• Someone from the U.S. Department of Justice

Acquirers, issuers and merchants would each have to provide itemized lists of costs incurred in providing or using card acceptance services the previous year.

A lose-lose proposition

Mallory Duncan, Senior Vice President and General Counsel at the National Retail Federation, said that in the wake of the Credit CARD act, the Conyers bill creates "the perfect storm" for congressional action on interchange. And he raised the specter of the economy, arguing "consumers can't continue to pay artificially inflated prices just so the credit card industry can skim profits off the top."

Edward Yingling, President and Chief Executive Officer of the American Bankers Association disagreed. Interchange serves an important purpose, and retailers just want to get out of paying their fair share, he said. "The bill introduced today represents an effort by the merchant community to have the government interfere with the payment system so that they can reduce their cost of doing business," Yingling said in a June 4 statement. "It's clear that giant retailers want to pocket interchange revenue and continue to receive the added convenience and protection payment cards provide."

HR 2695 has not yet been scheduled for public hearings. Some Washington insiders suggest it is mostly symbolic because both retailers and banks are key constituencies that lawmakers aren't eager to alienate, especially in the current economy. And any way you cut it, one of those constituencies loses with interchange legislation

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