As part of a growing call for government regulation of the banking and merchant account industry, several Senators are now espousing the view that a fee limit should be imposed on the ATM machine business.  Three Senators, led by Iowa Democrat Tom Harkin, assert that ATM fees are too high – and are especially problematic for lower- and middle-income Americans.  As such, the senators assert that the cost to withdraw money from ATM’s should be no more than 50 cents.

Senator Harkin chimes in on this issue:

“In recent years, Congress has acted to protect consumers by setting appropriate limits on the types of fees that financial institutions can charge consumers. However, one area that lacks these sensible restrictions is the fees charged to consumers for using Automated Teller Machines (ATMs).  Consumers are being charged ATM fees that are well in excess of the cost of providing services, in some instances, as much as $5 per withdrawal.  These fees are outrageous, are anti-consumer, and they need to be reigned in.”

At present, banks and independent operators of ATM machines set their own fee structure and can charge any amount they deem that the market will bear.  It’s estimated that the average consumer’s cost to withdraw money from a different bank is $3.54 – well beyond the deemed approximate cost of 36 cents to facilitate the transaction.

Banks and especially independent ATM operators who vehemently oppose the Harkin amendment assert that the costs to carry out an ATM machine business transaction are well above the quoted 36-cent figure.  They declare that all their expenses should be considered: Buying the device (which can typically run from $5,000 to $50,000), gasoline expenses to feed the machine money, purchasing parts and providing general upkeep of the device also entail costs.

Nevertheless, some politicians and consumer advocates feel that banks and independent entities should not reap great profit (any profit?) when consumers are simply trying to access their own funds.  In their estimation, by capping ATM fees at 50 cents, owners of ATM machine businesses cannot unfairly gouge prices.

If this amendment comes to pass – and it is presently stalled in the Senate – the ramifications may be far-reaching and perhaps the net outcome, many aver, will not help consumers at all.  Consider what a price cap may do to the ATM machine business itself?  In the absence of any meaningful profit, many banks and independents may simply provide less ATMs in neighborhoods.  While it may appear that there is a glut of these devices now, a steady contraction may render many communities without a nearby ATM machine.  Those devices that remain may be less sophisticated as enhanced technology costs money.

Moreover, if banks are to receive less revenue from outside ATMs, they can find other ways to make up the difference.  For example, they can impose a general fee for ATM use to their entire customer base.  In contrast, independents would not be able to accrue another stream of revenue and may be forced out of business.

Many consumers seem divided on the issue, too.  While those applaud a financial ATM cap (embracing the notion that a buck saved is a buck earned), others are truly concerned about price setting as it relates to our capitalist economy.  This camp believes that consumers have choices and they don’t need to withdraw money from certain ATMs if they want to avoid an expense.

I read where one forum member posted in a tongue and cheek manner that popcorn at movies seems way over-priced.  Popcorn comes from corn, he added, grown in Iowa, and as such, price limits should be set on popcorn and Iowa corn.  He wondered where price setting ends?  It may very well begin with the ATM machine business.

The Wallstreet Reform Bill, calling for greater transparency among investment firms, big banks, mortgage companies and credit card processing companies, just became more controversial.  The Durbin Amendment to the Wallstreet Reform Bill has recently been passed in the Senate and continues to spark much heated debate.  Dick Durbin, Senator Majority Whip, asserts that the card holding associations continue to act in a reprehensible fashion, and in an effort to sustain their tremendous profits, have hurt the average merchant with their upward spiraling processing costs.  In seemingly populist fashion, the Durbin amendment hopes to curb retail merchants' costs by setting 'reasonable and proportional' interchange fees for debit cards. 

Let's look at Durbin's recent statement:

"By requiring debit card fees to be reasonable, and by cleaning up Visa's and MasterCard's worst abuses, small businesses and their customers will be able to keep more of their own money.  Making sure small businesses can grow and prosper is vital to putting our country back on on solid economic footing."

Now many retailers would say a collective 'Amen' to any legislation that may lower their processing expenses and understandably so.  However, many financial analysts, bank representatives, and insiders in the credit card processing industry are deeply concerned about the amendment's domino effect and unanswered questions, including the following:

- Will business owners really pass on the savings to consumers?  In my idealist state, I would say, 'Yes,' but embracing a realistic mindset, I'm inclined to think not.  Retailers are in almost unanimously in favor for the legislation to pass.  If they did not stand to financially gain from it (returning savings to consumers), why clamor for the passing of this bill?

- Will the card holding associations pass other types of fees to make up for the profit loss stemming from a reduction in debit card fees?

- Will card issuing banks also look to add to their revenue base to compensate for the loss of Interchange debit profit?  Will they raise interest rates or annual fees , reduce or eliminate certain rewards cards, drop unprofitable customers, reduce credit lines, mandate that consumers must pay faster, etc.?

- As interchange profit (used to defray the cost of rewards) becomes less,  some party will have to make up for it -- most probably, consumers.  As fees attached to rewards rise, consumers may be likely to use credit cards less, hampering business growth. 

- How will the Durbin amendment affect independent community bankers and smaller credit unions?  If these entities accrue less profit, they may not be able to afford offering rewards cards.  (While Durbin exempts banks and credit unions with less than $10 billion in assets from the debit card fee controls, such institutions are then offering debit cards that are more expensive for merchants to accept which may propel merchant backlash from accepting such cards.  On paper, however, it should be noted that if a merchant accepts, say, Visa from any bank, he/she has to accept a Visa credit card from any bank.)      

- Will the Durban amendment bill provide further competitive advantage to large companies, such as Walmart?  Their hefty processing volumes ensure a larger pie of savings and even greater financial clout.      

- What about the markup from interchange that acquirers assess?  Their exists definite risks and costs that acquirers assume in transferring funds from consumer to merchant, so how can their profit be regulated?

The aforementioned list of questions is far from exhaustive and the Durbin Amendment looks favorable on the surface but will the collateral damage  be extensive?  Government regulation efforts always seem to present a two-edged sword.  Here, some assert that the this amendment is cutting edge legislation while others aver that we'll be proverbially cutting our nose despite our face.  Please share your views on the Durbin Amerndment.   

Physicians, before launching their medical practice must always promise to “first, do no harm.”  They take a Hippocratic oath, a moral code of conduct, where they avow to serve the patient’s needs with commitment, honesty, respect, and dignity.  If only all business owners would take a similar vow, ensuring that the customer’s needs supersede those of their own.

In the quest to sign up customers, too many business folks dissemble motives, lie by omission, assess hidden fees, and commit one transgression after another.  The “Golden Rule” seems irrelevant to so many business dealings, and the old fashioned notion of a handshake deal seems too precarious in this day and age.  Unfortunately, the field of merchant card services is no different as many providers are perfectly comfortable discarding ethics and integrity for the all-mighty dollar.

As you look to secure merchant card services, keep the following in mind:

Does Your Preferred Merchant Card Services Have a Termination Fee?

You should go into business with a positive attitude and thoroughly believe that your enterprise will take off and prosper.  However, what happens, over the course of time, if business does not meet your expectations and you decide to close up shop.  You should not have to pay a cancellation and termination fee to the merchant card services vendor should you decide to go towards a different career direction.

Moreover, if you become disenchanted with your credit card processor, you should be allowed to switch without penalty so you can go on to “greener pastures.”

Is There a Monthly Minimum associated with Merchant Card Services?

Credit card processing companies may mandate that you process a certain volume of credit cards per month or pay additional monthly fees.  Small/new business owners may have trouble attaining this threshold of processing so it’s best to look for merchant card services that waive this monthly minimum amount.

What is the Start Up Fee?

Ideally, any merchant card service that you secure should have an affordable startup fee (preferably $0 dollars.)  You’ll be spending money on many different operational expenses so it would be beneficial to contain your initial credit card processing expenses.

Do You Know the Rates – and I Mean All of Them!?

Merchant card services are notorious for highlighting their competitive fees, but omitting ones that are less than competitive.  You don’t necessarily need a Masters degree to figure out the rates that should be quoted.  Please read the following to get a better grasp of the various fees: http://www.intelli-collect.com/cblog/index.php?/archives/83-Merchant-Account-Fees-to-Know-so-You-Wont-be-Nickle-and-Dimed.html

What is the Reputation of the Merchant Card Services Provider?

A little due diligence on your part goes a long way.  Any vendor that you may select in the merchant card services field should enjoy an excellent reputation.  At the very least, a company should be registered with the Better Business Bureau and have few, if any, strikes against them.

Should I Take the Time to Test Out Merchant Card Services Before You Sign Up?

Yes, before you sign your name on the dotted line of a contract, speak with a representative or two from the credit card processor to ensure that you’re treated in a friendly, respectful manner and that all information is thoroughly disclosed upfront.  When you purchase a car, it’s important to take a test drive.  Similarly, take a test drive before obtaining credit card processing capability.

By keeping the aforementioned points in mind, you’ll be able to choose the best merchant account for your business.  However, it would be a more gentle process if there existed an analogous Hippocratic oath taken by the providers of merchant card services.