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  • Credit and Debit Card Issuers Agree to a $7.25 Billion Settlement with US Retailers

    Credit and Debit Card Issuers Agree to a $7.25 Billion Settlement with US Retailers

    In what could be the largest antitrust settlement in US history, credit card issuers have agreed to a $7.25 billion settlement with US retailers.  The lawsuit involves a payment to a class of stores of $6 billion from Visa, MasterCard and more than a dozen of the country’s largest banks who issue the companies’ cards.  The proposed settlement would also allow stores to start charging customers extra for using certain credit cards in an effort to steer them toward cheaper forms of payment.

    According to lawyers for the plaintiff, card companies have also agreed to reduce swipe fees by the equivalent of 10 basis points for eight months for a total consideration to stores valued at about $1.2 billion.  Additionally, merchants would be required to disclose information about card fees to customers, and credit card surcharges would be subject to a cap.  Surcharge rules would not affect the 10 states that currently prohibit that practice.

    “This is a historic settlement,” said Bonny Sweeney, a lawyer for the plaintiffs.  The settlement “will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of the merchants and consumers,” said Craig Wildfang, who also represented the plaintiffs.

    Noah Hanft, general counsel for MasterCard, said the company believed its interests were “best served by an amicable resolution” of the case.  Visa Chief Executive Officer Joseph Saunders said the settlement was in the best interest of all parties and did not expect the settlement to impact its current guidance.

    Not everyone was pleased with the proposed settlement, however.  One class plaintiff, the National Association of Convenience Stores, rejected the settlement in a statement on Friday from its president, Tom Robinson, who is also president of Robinson Oil Corp.  “Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces,” Robinson said.  “The proposed considerations are a far cry from the $50 billion in swipe-fees paid each year by US retailers.”

    The American Bankers Association, a trade group whose members include the bank defendants, said retailers, not consumers, stood to gain the most from the proposed settlement.  “Big-box retailers will likely seize this opportunity to ask Congress for even more handouts,” said ABA President Frank Keating in a statement, referring to the Durbin amendment passed by Congress in 2010 limiting debit-card swipe fees; a move that banks say resulted in an $8 billion windfall for retailers.

    “The legal process worked and should send a signal to Congress that it is wrong to pick winners and losers in a complex dispute between industries,” the Electronic Payment Coalition, which represents payment networks, said in a statement.  The plaintiffs charged that Visa and MasterCard colluded directly and indirectly through the issuing banks to keep merchants from finding ways to mitigate credit-card costs.

    Plaintiffs in the case include supermarket chain Kroger Co, pharmacy chain Rite-Aid Corp and shoe retailer Payless Shoe Source, as well as trade associations such as the National Association of Convenience Stores, National Grocers Association and the American Booksellers Association.

    The National Retail Federation, a trade group representing retailers, said that “the test will be whether the injunctive relief is meaningful.  Unless it is, the card market will stay broken and neither merchants nor their customers will achieve a long-term benefit.”

    For more information visit:  http://www.brecorder.com/general-news/172/1215994/

  • First Tennessee Bank Introduces Its New Debit Card for UT Vols Fans

    First Tennessee Bank Introduces Its New Debit Card for UT Vols Fans

    In an announcement on Friday, First Tennessee Bank introduced its new debit card for UT Vols Fans.  First Tennessee Bank, a longtime corporate supporter and the official bank of the University of Tennesse’s Vols and Lady Vols, already offers Big Orange checking, with personalized checks.  With the university’s strong fan base and the bank’s leadership position in the Tennessee market, the two make for a great fit.

    “You might use your debit card several times a day,” said Pam Fansler, president of the bank’s East Region, “so a Vols card gets attention.”  The customized debit card features the distinctive big orange “T” allowing University of Tennessee fans to show their colors.  Unlike some debit cards, this one can even be used worldwide.

    For those who aren’t die hard UT fans, the bank also offers a Memphis Grizzlies and University of Memphis Tigers debit card.

    For more information, visit www.firsttennessee.com.

     

     

  • Oakland Issues Hybrid ID – Prepaid Debit Cards

    Oakland Issues Hybrid ID – Prepaid Debit Cards

    by Shane Tripcony

    From a municipal public policy standpoint, Oakland, California’s decision earlier this year to issue identification cards that also act as prepaid debit cards was hailed by some as a double play. For one thing, the decision by Oakland officials to make ID cards bearing a person’s photo, name, address and signature available was a way to provide citizens, both legal and illegal, a route to utilize local government resources, like museums and libraries. In providing this kind of ID card, which can’t be used in lieu of a driver’s license or for air travel, Oakland was following the lead of other cities, such as nearby San Francisco and New Haven, Connecticut.

    But according to a recent article on Governing Magazine’s blog, Oakland is the first city in the nation to provide an option for the users of the municipal ID card to also use them as a prepaid debit card. According to the article by J.B. Wogan, the reason Oakland chose to do this is because of a desire to encourage more low-income residents – typically the segment of the population that does not already have an ID – to have access to traditional banking services. Often, citizens who don’t have bank accounts rely on expensive check-cashing and payday lenders for their financial service needs.

    The Oakland initiative adding a prepaid debit card function to municipal IDs is attractive enough that about 2,000 citizens have already gotten them and cities like Los Angeles and New Haven are considering rolling out their own programs. But not everyone is a fan of the type of prepaid card Oakland makes available to its citizens. In particular, the city is being criticized for what some see as the excessive fees associated with the card. To get the ID, citizens have to pay a flat $15 fee. Once the prepaid debit card function is enabled, users pay a wide range of other fees, including a monthly service fee of $2.99, a point of sale charge of $0.75, $1.50 for in-network ATM cash withdrawals and $2.99 for customer service assistance.

    While these fees are not uncommon in the realm of prepaid debit cards, critics argue that Oakland can and should do better. In an open letter to the National League of Cities, Michelle Jun, a senior attorney with Consumers Union, the policy and advocacy arm of Consumer Reports, expressed concern that city-issued prepaid cards weren’t offering citizens the best possible deal. “We believe that given the position of a municipality as a trusted entity, cities have the added responsibility of providing the most consumer friendly financial products and services,” writes Jun. “We believe the government and other public entities that choose to link a prepaid card option to any card or service provided by a municipality should provide its citizens with an opportunity to access a product or service that is fairly priced and provides the best value to the user.”

    As Wogan points out in his blog, Oakland’s fees are lower-than-average, according to a study done last year by the Pew Charitable Trusts. Still, according to Jun and others, cities issuing prepaid debit cards should ensure that they have as low fees as possible and provide as much protection against loss or fraud as is feasible.

  • Occupy Prepaid Debit Card No Slam Dunk

    Occupy Prepaid Debit Card No Slam Dunk

    When the Occupy Wall Street movement announced its intention to unveil a prepaid debit card this past July, the news stirred plenty of attention. Unsurprisingly, the notion that a group of protesters who directed the bulk of their anger at bankers would enter the financial services industry was too delicious a story for many news outlets to pass up.

    Adding to the allure of the creation of The Occupy Cooperative, which will release the Occupy Card and eventually hopes to offer other banking services to its product line, was the possibility that it could be the start of a shakeup of Wall Street that protests alone could not accomplish. “As we build up the number of users of the card, we shall soon be able to introduce further services that will shake up the current behemoths in the banking sector,” Carne Ross, a founding board member of the Occupy Cooperative, told BestPrepaidDebitCards.com in a recent interview. “These products will serve the same constituency as the card, wherever possible they will bolster the credit unions, provide low-cost choices, bypass the entrenched systems that rip everyone off, and brick-by-brick build alternatives for ordinary folk’s needs.”

    Good intentions and plenty of publicity aside, the Occupy Cooperative faces a tough road ahead. That’s the message of a recent article in Time Magazine entitled “5 Hurdles an “Occupy”-Branded Banking Product Must Clear.” In the story, reporter Martha White identifies a number of challenges Ross and his colleagues will face as they begin their crusade to upend the financial services industry.

    Among the hurdles the Occupy Cooperative must surmount are raising a sufficient amount of start-up capital. In her story, White cites the efforts of Occupy activists in San Francisco, who have tried and failed thus far to cobble together enough cash to launch what’s known as the “People’s Reserve Credit Union.” Also problematic, at least if Occupy intends to act like a regular bank and take deposits and offer loans, are the many, many regulations involved. While the Time article correctly points out that prepaid cards are largely unregulated (at least for now), entering into traditional banking services would require Occupy to buy a bank or credit union, since starting up a new one would mean obtaining a federal or state charter.

    Other challenges Occupy faces also include the need to access the payment system – which costs money – so that cardholders can actually use their plastic and simply being viable financially if, as Ross promises, there are few fees associated with the card. Finally, White uses the example of PerkStreet Financial as a cautionary tale. When PerkStreet launched five years ago, she writes, it promised to upend the banking system by offering consumers such incentives as 2% cash back on debit card purchases. But PerkStreet’s ultra consumer-friendly approach didn’t make it; it will shut down in September. “We tried to change banking, the most broken industry in the country, in the midst of a financial crisis. It was incredibly hard and we were ultimately unsuccessful,” the article quotes PerkStreet CEO Dan O’Malley, from a blog post O’Malley wrote.

    Only time will tell whether Occupy can figure out a way to succeed. Obviously, though, the group that hit the streets to protest inequality and the abuses of the financial system knows better than anybody how hard change can be.

  • Changes To American Express Serve Accounts

    Changes To American Express Serve Accounts

    In the increasingly competitive world of prepaid debit cards, companies are having to scramble to stand out from the crowd. The American Express Serve card has done that thus far by offering a variety of perks – including things like roadside assistance, purchase protection and early access to sporting event and concert tickets – that one would expect from a global financial services company like Amex.

    But the desire to entice more people to sign up for the Serve prepaid debit card is no doubt behind a number of changes American Express announced in mid-August of 2013. While not as glamorous as, say, the chance to snap up good seats to a Dallas Cowboys and Washington Redskins clash, the recent tweaks made to American Express Serve accounts are more substantive and beneficial to regular cardholders.

    Indeed, in the past American Express Serve cardholders were able to replenish their accounts using direct deposit from their employer or by, among other things, accessing funds from a separate debit or credit card account. As of August 13, however, Serve accounts began accepting direct deposit for a variety of payments from the federal government as well, everything from tax deposits to Social Security checks to Worker’s Compensation.

    Another upgrade made to the Serve card involves ATM transactions. Cardholders will now be able to withdraw cash without incurring a fee from more than 22,000 ATMs in the MoneyPass network worldwide. Outside of the MoneyPass network, Serve will charge $2 per withdrawal, which is in addition to any fee levied by the ATM operator.

    Perhaps the most important of the recent changes announced by American Express has to do with Federal Deposit Insurance Corporation (FDIC) insurance. As of August 13, any time a Serve cardholder adds money to their account, American Express quickly places those funds into a so-called custodial account (with either Wells Fargo or American Express Centurion Bank) that has FDIC insurance. The upshot of this is that Serve account holders receive what’s known as FDIC pass-through insurance, meaning that their money (up to $250,000) is protected should a bank fail.

    As competition among prepaid debit card issuers heats up, expect more and more changes and improvements to the standard features companies offer.

  • Celebrity Prepaid Debit Card Smackdown 2013

    Celebrity Prepaid Debit Card Smackdown 2013

    Nobody would argue that hip-hop impresario Russell Simmons is anything but cool. After all, the guy was one of the forces behind Def Jam, the record label that brought us the Beastie Boys and LL Cool J. These days, Simmons is a business magnate whose net worth is estimated to be north of $300 million. And Simmons is looking to add to that sizable fortune by lending his name to a celebrity prepaid debit card called the RushCard. In doing so, Simmons joins personal finance guru Suze Orman and the increasingly notorious singer Justin Bieber in endorsing and promoting celebrity prepaid cards.

    An examination of the fees associated with these three celebrity prepaid cards by BestPrepaidDebitCards.com reveals that it can be a pricey proposition to use star-powered plastic, albeit not always more expensive than average prepaid debit card fees. For instance, while Orman and Bieber charge $3.00 and $3.95, respectively, in standard monthly fees, the tab for Simmons’ celebrity prepaid card is $9.95 – an amount that is more than $5.00 higher than the average monthly fee. To be fair, there are other Rush card offerings with lower monthly fees and may be found in free monthly fees for the Pay As You Go Plan to $5.95 or $7.95 on the Rush Unlimited Plan depending on your direct deposit status.

    In other areas, the fees charged on the celeb-backed cards are comparable, including similar charges for ATM transactions or for putting money into the account (known as loading fees). Consumers should note, however, that although an issuer may not charge a fee to load cash on their card, they may have to utilize third party services which do charge, such as Green Dot MoneyPak or MoneyGram, and fees can range from $3.74 to $4.95.

    An alternative product is Bluebird by American Express, which does not offer star-power, but it does offer great features and very low fees. Still, there’s no getting around the fact that there’s a premium to be paid for associating yourself with a celebrity card. In a hypothetical tally of fees from a month of modest usage of our sample RushCard plan, BestPrepaidDebitCards.com calculated that it would cost a cardholder around $12 per month. Is using a celebrity prepaid card really that cool?

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    An Alternative to Traditional Checking Accounts: Bluebird by American Express

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Prepaid Debit Card Reviews, Complaints, Etc