GLG News by Credit Card Experts

Duncan MacDonaldConsultantDuncan McDonald

Bankcard industry lobbies Congress to leave interchange fees alone

September 22, 2009

Analysis of:Lafferty Group - Interchange battle rages on | www.lafferty.com

The primary story here is not the card industry's standard defense of bankcard interchange fees. It is that Visa and industry trade associations are responding to the clear and present danger that an angry Congress is going to side with merchants by enacting a law to limit interchange fees. Their defense of the fee is that polling of consumers shows a wide majority in favor of charging merchants for accepting cards. But it doesn't address whether current fees are too high and unfairly applied.

Duncan MacDonaldConsultantDuncan McDonald

Bank stocks will crumble in the coming months

August 14, 2009

Analysis of:Stocks Slip as Banks Pull Back | online.wsj.com

The WSJ article suggests a modest, temporary pullback for banking stocks amidst all the recent glowing reports that the Great Recession is over. It is not over. It is going to get much worse, precisely because of a crisis that is about to erupt for the bankcard industry.

Duncan MacDonaldConsultantDuncan McDonald

Turmoil at Visa or a hopeful turn in the road?

July 28, 2009

Analysis of:Visa Says Its President Steps Aside | online.wsj.com

The termination of Visa's president reflects the crisis in the bankcard industry. Since its IPO, investors, issuers and merchants been waiting for Visa to lead the industry to new heights. That has not happened. In fact, things have gotten worse. Cardholders, merchants, Congress and states are in rebellion against the industry, which has all but given up on innovation.

Duncan MacDonaldConsultantDuncan McDonald

Is interchange protection a Custer's last stand for the bankcard industry?

July 16, 2009

Analysis of:JPMorgan's Profit Soars Despite Downturn - NYTimes.com | www.nytimes.com

The article reveals the growing, almost populist attack against bankcard interchange pricing.  Heretofore, merchants have challenged the fee via lawyers, lobbyists and trade associations.  Now it is trying to enlist cardholders, as if taking advantage of the enormous public distrust of banks and card issuers.   The industry appears to be digging it its heels, perhpas reflecting a fear that issuers cannot absord any additional revenue losses without signifigantly and permanently damaging the product, not to mention the bankcard systems.  The new CARD Act forces the industy to absorb tens of billions in new costs and restricted revenue streams.  Doing the same on interchange could be more than banks can handle.

Duncan MacDonaldConsultantDuncan McDonald

Why are merchants in the EU resuscitating their war against bankcard interchange fees?

June 16, 2009

Analysis of:Financial Times FT.com | www.ft.com

The battle by merchants in the EU against bankcard interchange fees has been going on for over a dozen years.  A Eurocommerce complaint to the EC to reinvigorate the battle rasies questions.  Has the EC slowed its concern about the issue and if so why?  Is Eurocommerce fearful that the EC now sympathizes with card issuers, perhaps because of the banking crisis?  Or is the Eurocommerce filing an attempt to close the war in its favor?  Does it reveal new information and arguments?  Does it exploit the populist anger in the EU against the banking industry to win Commission support?  The Eurocommerce filing iwill be important to the issue in the US if it achieves a cache in Congress and is sophisticated enough to merit disclosure in court documents in New York.  If it is more of the same, it could backfire.

Duncan MacDonaldConsultantDuncan McDonald

SEC decision could reduce bankcard exposure in interchange class action

May 28, 2009

Analysis of:Citi, SEC Are in Talks to Settle Asset Probe | online.wsj.com

If as suggested in the article the SEC decides to reduce Citi's exposure to damages for securities violations because it is now co-owned by the government and receiving TARP money, why shouldn't the same logic apply to the banking industry's potential exposure in the NY interchange lawsuit?  In that case, merchants are seeking tens of billions in damages and equal amounts in interchange concessions going forward.  Presumably, such exposure would worsen the banking crisis and the goals of the Obama administration to resurrect banks financially.  Unquestionably, the government has a considerable stake in the outcome of the case.  How much will it be worth to each side?

Duncan MacDonaldConsultantDuncan McDonald

Obama's Nominee to the High Court is Pro Class Action, Pro Trial Bar

May 27, 2009

Analysis of:News Analysis - Nominee's Rulings Are Exhaustive but Often Narrow - NYTimes.com | www.nytimes.com

Sonia Motomayor authored the most radical class action certification decision in US history in 2001.  In an antitrust lawsuit by Wal-Mart and other retailers against Visa and MasterCard, she upheld a lower court decision that created the first class action ever between two industroies crucial to the US economy -- 6 million retailers vs. 10,000 bank issues of credit cards.  In doing so, she also radically lowered the standards plaintiffs must meet to obtain a certification of a class.  Oddly, she based her decision on a class standard for discrimination cases.  Her decision was so radical that her court, the 2nd Circuit Court of Appeals in New York, several years later totally repudiated her decision.  Sotomayer's decision made the 2nd Circuit the easiest in the US to get a certification.  The decision that reversed hers was so sharp that it made the 2nd Circuit the hardest for certifications.

Duncan MacDonaldConsultantDuncan McDonald

Congress poised to tackle bankcard interchange pricing

May 14, 2009

Analysis of:Paying With Cash Could Soon Pay Off | online.wsj.com

Senator Dubin's bill modestly will open the door to allow merchants to give discounts to consumers who pay in cash instead with credit or debit cards.  As such, it will elevate and thereby politicize another contentious charge by bankcard issuers, the consequence of which could further alienate banks from their customers.  The discount plus the bad politics could further erode bankcard transactions, something the industry cannot afford amidst skyrocking writeoffs and a new Bill oF Rights law that will significantly threaten non-APR fees.

Duncan MacDonaldConsultantDuncan McDonald

Congress might legislate reductions in bankcard fees, costing billions for issuers

May 12, 2009

Analysis of:New Fees for Card Usage Abroad | online.wsj.com

Senator Dodd's bill to reform bankcard practices, if enacted, will subject bankcard non-APR fees to a reasonableness standard.  The idea is to limit the fees to clsoely match the cost incurred by the issuer for the infraction that generates the fee.  For example, if the fee for a late payment is $35 and the actual cost to process it is only $10, the latter is all the issuer will be allowed to collect.  Ditto for foreign transactions, OCL fee, etc.   Because the Dodd bill does not define the new standard, either the FRB or lawsuits would make the determination. 

Duncan MacDonaldConsultantDuncan McDonald

Is Visa's challenge to the EC going to prevail or propogate another global round of lawsuits?

April 7, 2009

Analysis of:EU Charges Visa Europe Over Fees | online.wsj.com

When Visa fought the EC in the late 90s over interchange pricing, the EC responded with criminal threats, and Visa quickly caved.  The EC's settlement with MCI on the most recent iteration involving interchange should embolden it to play tough again.  Visa's surrender a decade ago set off a global attack in favor of merchants.  Is this the right time for Visa to go to the wall to help banks?

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