New Debit Card Regulations ...Changes Abound

So if you are like me in the morning you have routine. My routine consists of ironing my shirt as I watch the news (yes, I iron my own shirt... and sadly, it is therapeutic for me) and then thinking about what the day might bring. With all the talk on financial reform I could not help wonder about how it would impact me. I have already heard that big banks are announcing the end of free checking. So what else might be lurking around the corner?

One area in which I think we will see some movement is on credit and debit cards. Have you ever had this experience... I went into a gas station (large gas station franchise) and went to the drink section to buy a soda. When I get to the register they point to a handmade sign that says "minimum purchase is 3 dollars" for credit or debit cards." Exasperated I look around and see a bin of candy bars that says "two for 3 dollars" so I grab two candy bars and my drink and they gladly swipe my card for 4 bucks and some change. [Note: The worst part was they had put all the unsold old nasty candy bars in the bin but I didn't realize it until I was 30 minutes down the road.]

For most of us that experience might become even more familiar as, now with Congress’s blessing, they can make that a standard practice as long as the minimum is not more than $10 bucks. Merchants are free to offer discounts to people who opt to pay cash instead of using cards. The irony is that I hardly ever have cash so the discount for me is a zero win.

Luckily, merchants will not be allowed to give discounts based on which bank issued the card you are using. Why is that good you ask? Glad you asked. The bill gives the Fed the right to set a limit on the fees that stores must pay to accept debit cards which is called interchange. The law in its intent to focus on the big banks states that only banks with more than $10 billion in assets would be subject to the cap. So that's a good thing right....well not so fast.

Consider the downstream effect merchants may have to pay more to accept debit cards from smaller community banks or credit unions than big banks like Wells Fargo or Citi. If that happens it is only a matter of time before some stores might be tempted to offer discounts to people with big bank debit cards. It is not a stretch of the imagination to picture small retailers gladly accepting cards with the names of big banks that they recognize and then asking shoppers with cards from small credit unions or community banks to use cash or some other card. Net effect? I am forced to use a credit card from a large bank with an interest rate of 20-25 percent instead of my card from my credit union that only charges my interest of 9 %.

Another fear is that big banks will immediately use their clout to pressure Visa and MasterCard to lower merchant fees for all debit cards, not just the big banks’ cards. Now this is where it really starts to hurt...as smaller institutions like a credit union now have to absorb those losses in revenue while still competing with the bigger pockets of the large banks.

No matter what the intent was I can't help but feel that we will all face some unintended consequences of the recent changes.

Business at All Cost - Has Become Too Expensive

Over the years I have found that one of the hidden treasures in life is having a connection to the communities you are a part of. Communities can provide a source of support and strength in times of challenge and difficulty. We all anticipate some of the common life events that many of us pass through: graduating from school, first “real” job, first dates, buying a car, buying a house.

Yet, these events come with others that are not anticipated and we find it comforting to be able to reach out and ask for some advice from those we know and trust.

I think that is why so many people were shocked to see the CEO of a large oil company out sailing his yacht when the Gulf of Mexico and countless communities were still facing life changing peril. I guess in times of stress people sometimes run to the things that help them cope and for this leader it was his yacht.

What seems so terribly sad to me is that the people of one common community are counting on the focused leadership of this man to lend support and his undivided attention to getting the matter resolved. Yet, he has run back to his community, which is far from the Gulf Coast, and just wants to get his life back. Sadly, so do countless others in the Gulf Coast area. I grew up on the Gulf of Mexico and recall seeing the fishing boats head out at the start of the season so to me seeing the harm that has come their way is heartbreaking.

This whole tragic turn of events has reminded me of the Wall Street Meltdown. It is easy to see the similarities- top executives making decisions on events that happen in communities in which they don’t live or even plan to visit. Whether it was putting people in subprime loans (that everyone knew they could not afford) or sacrificing quality to make a faster profit (as is alleged in the Gulf Coast tragedy), the results are the same – people in a community suffering because of the actions of some distant executive. Sadly, it is so easy to see how someone in an office so far away fails to see anything other than the report that is right in front of them.

Yet, how do you describe a community on paper? How do you write about the people that come into the local breakfast dinner in the morning and all they have to talk about is bad news? How do convey to the corporate board room the challenge families, who work on the Gulf Coast, face as bills arrive with every trip to the post office. That sense of despair is not easily seen on a budget line item.

How do you teach community to a generation of business leaders? How do you get them to think beyond how they can make money off their efforts? Until we can get people to get out of their offices in some far away community and come see how people live in another community then we will always be waiting for the next disaster. How many collapsed mines, exploding oil wells, and Enron accounting scandals do we have to face before we demand more from the businesses that operate in our communities?

Business and making a dollar no matter the cost has become too expensive.