Durbin: What REALLY Happened To The Savings?

Durbin: What REALLY Happened To The Savings?

We all remember it like it was yesterday, the Great Recession that sent the financial markets falling like dominoes and shook American consumer confidence like no time other than the Great Depression. In fact in multiple ways it was worse, America’s largest sectors, Automotive, Real Estate, Stock Market, Retail, were all crippled by a grenade called “Subprime“.

In 2010, an attempt was made to prevent a future collapse of this sort through the passing of the “Dodd-Frank Wall Street Reform and Consumer Protection Act. This law according to the U.S. Government is “The most far reaching Wall Street reform in history, Dodd-Frank will prevent the excessive risk-taking that led to the financial crisis. The law also provides common-sense protections for American families, creating new consumer watchdog to prevent mortgage companies and pay-day lenders from exploiting consumers. These new rules will build a safer, more stable financial system—one that provides a robust foundation for lasting economic growth and job creation.” This was a great move by the United States Government to implement more insight/oversight into the financial industry and I must say it still has a long way to go.

The Durbin Amendment was added to the Dodd-Frank Legislation and went into effect October, 2011. What this amendment set out to accomplish was a drastic reduction, around 50% reduction, in the swipe fees businesses had to pay when accepting debit cards issued by “regulated” banking institutions. These would be banks that have in excess of 10 billion dollars in assets (i.e. Wells Fargo, US Bank, Chase, Bank Of America, etc.). The estimated savings that businesses should see over all was estimated to be $8 billion dollars per year, but according to data published by the Electronic Payments Coalition, consumers haven’t seen a dime of savings from the regulation that was supposed to save them money at the register. So $32 billion dollars is missing and the Electronic Payments Coalition is pointing the finger at Big Business for pocketing the savings. I think they are inaccurate in this claim as there is another likely culprit that is known for significant white-collar crime in the financial industry: Payment Processors.

The payment processing industry is still very unregulated despite the Dodd-Frank legislation that went into effect in 2011. The likely reason that consumers aren’t seeing savings as a result of this legislation is because there was no legislation that mandated payment processors to pass on the savings to retailers so that consumers would see the benefit of lower prices. Many payment processors use deceptive billing strategies that hide the true interchange costs from businesses so that they can keep much of the Durbin Amendment intended savings as profit. Junk fees are another major problem in the industry where it is routine to see 5-10 illegitimate fees on a merchant statement, causing the business to pay more than they agreed to. Unfortunately, many payment processors saw the Durbin Amendment as an opportunity to add additional transaction fees or monthly junk fees to their monthly statements resulting in zero savings for the American business owner and consumer.

Until the payment processing industry is mandated to use a full disclosure transparent approach to all billing models, cost reducing legislation will only line the pockets of payment processors that don’t mind keeping the cost reductions to themselves. If the Electronic Payments Coalition would like to see lower prices for all consumers, they should fight for more transparency and integrity in the payment processing industry as a whole as much of the legislative savings never reached American businesses in order to be passed on to the American consumer.

If you are a business owner and would like to find out if you are getting your Durbin Rebate, contact us .

Payment Processing: Finding The Right Provider

Payment Processing: Finding The Right Provider

Thousands of Owners, Controllers and CFO’s go in search of the perfect payment processing account year after year only to find themselves going through the process again at some point, a process that usually takes more time than they want to spend and one that also angers them depending on who they let in their office.

After investing much of their time and mental brain power they throw the dart, often at the one that appeared to give them to best deal on paper. A year later they find themselves back in the office with another set of darts trying to find a better deal, again. Have you ever wondered why this happens?

The majority of the reasons why this happens is because the company that was chosen was based on who had the shiniest proposal instead of the best fit for their needs, goals, and objectives. The payment processing industry is one of the most complicated when it comes to understanding business models and rates, so don’t be disappointed in yourself if the dart landed on the wrong company again. The industry is structured in a way that allows companies to build proposals to look better than the one you’re currently using and then they can change the deal after you become a customer. This is why you can sign up for what seems to be a great deal and then at some point fees get added to your statement that you didn’t initially agree to. I wish there was a way to throw these folks in jail for doing business in this way as its bad for American businesses, but we don’t have that as an option currently. There is a solution to the madness though, here is a strategy you can implement in the future when searching for a payment processing company:

Implement An Interview Process

I would suggest treating this like you’re interviewing a new employee at your company. Have 20-30 questions that you have all the answers to that fit what your expectations and wants are from your payment processor. You don’t want it to come down to what appears to be the best deal. Consider all the things that would be important to you as a business owner, your staff, and your customers. Here are a few examples that you may want to ask:

How long are my rates guaranteed to stay the same? Obviously, we all know that the card brands typically increase or decrease their rates in April & October. Does your company also increase their margin without notifying you?

What will the process look like for me to address chargebacks with your company? Many companies provide excellent resources in this area and could save you a considerable amount of time and money if done properly.

What will it cost me to acquire equipment? Many companies still promote leasing $200 terminals for $100 per month for 3-4 years on contracts that are non-cancellable. Will this equipment work with any processor? Why is the agreement non-cancellable?

These are all questions that you can ask to make sure if you do move you can do it with the confidence that you’ve selected a great partner for processing your payments.

If you’re looking to learn all of the insights you need to get the best payment processing account, download a copy of “The Truth About Accepting Credit Cards”, a mini-book that discloses the different types of providers, 15 of the most common myths, and an interview process you can use when selecting a payment processor!

You can also reach out to schedule a conversation, Let’s Talk!