New York Consumer Group Raises Concerns About Some Card Innovations

NEW YORK – The New York Public Interest Research Group, a consumer organization which has a track record of raising card fee issues, has taken aim at some of the cards and card practices which have been among the hottest new entries in the bank and credit union card industry. Specifically the group, which is the New York affiliate of the U.S. Public Interest Research Group, has recommended banks and credit unions which charge fees for so called point of sale transactions in which cardholders use a personal identification number disclose those fees to the consumer at the POS. The group also decried the high fees in place on many pre-paid cards as well as the fees and policies which are being applied to many gift cards. According to the group’s Pricey Plastic report, 89% of the New York banks and credit unions surveyed charged a fee when cardholders used their debit cards at POS terminals and entered a PIN. The growth in PIN debit has meant that consumers need more information about these transactions, the group argued. “Congress should pass legislation to require that consumers get information at the point of sale about the costs of using the fees for using their ATM card for online and offline transactions,” the report urged. “Moreover, Congress should require that consumers get a rolling and end-of-year tally of their ATM surcharge and debit card fees so they can keep track of their card usage in a meaningful way.” Susan Craine, a consumer advocate with NYPIRG and one of the authors of the report, admitted that the survey was not scientific and reported that the organization had not sought to seek credit unions out in the survey. “We just told our surveyors how many financial institutions we wanted them to cover around the state,” Craine said. Four of the 40 New York financial institutions whose policies on POS fees were surveyed were credit unions: the $493 million Americu, headquartered in Rome; the $85 million Hudson River Credit Union, headquartered in Corinth; the $1.2 billion State Employees FCU, headquartered in Albany, and the $1.4 billion Visions FCU, headquartered in Endicott. Americu and Hudson were reported to charge $0.25, while SEFCU was reported to charge $0.95 and Visions $1.50. The average overall for the 40 surveyed institutions was $0.70. But two of the four disputed how the report had reported their fees. Susan Commanda, CFO of Hudson River, reported the credit union did not charge a fee for its POS debit transaction where a PIN is used. “We don’t even charge if they get cash back,” Commanda said. Jayne Searles, marketing manager for Visions, reported that the report was accurate in that the credit union does not charge for the first five POS transactions with PINs per month. But the group’s report had said that Visions charges $1.50 per transaction and Searles reported the additional charge could be as low as $0.50, depending on the member’s balances. Visions’ policy highlights what critics of the report said is the biggest problem with the report’s debit recommendation: feasibility. “From the point of view of the financial institution it’s just not workable,” said Cindy Ballard, executive vice president with PULSE, the ATM and EFT network headquartered in Houston owned by both banks and credit unions. Ballard noted NYPIRG’s suggestion closely mirrored a previous suggestion that would have mandated that banks and credit unions reveal at ATMs how much they charge their own cardholders for transactions at so-called foreign ATMs. That suggestion died, Ballard explained, when it became clear that such charges were part of relationship pricing and were thus very difficult to pin down. “Some credit union members or bank customers might be charged, some might not,” she said. “It’s very difficult to put a disclosure policy into place when there is no uniformity in the information.” Ballard also noted that there were technical difficulties in building a disclosure announcement into the hardware and software of the POS terminals, many of which have very small screens and are set up to take only the most minimal of transactions. The PULSE executive also questioned how many consumers who are charged a fee are not aware of the charge. “Most consumers are aware of what a bank or credit union charges,” she said, an observation that Searles backed up. “We are very explicit about our policy on charges because they are part of a strategy to help change cardholder behavior,” Searles said. “The policy is meant to back up our lobby signs, newsletter articles and statement inserts which tell our members to choose credit not debit at the POS terminal,” Searles said. “We want them to understand that whenever they hit that credit button, it’s definitely free,” she added. Searles reported that Visions’ also used a positive approach to help lead members to sign their debit receipts by holding a monthly drawing for prizes for members who used their debit cards with a signature in the preceding month. The group also reported that most prepaid cards which are increasingly popular among people without bank accounts are among the most expensive card products in the industry. According to the group’s survey of 15 most common pre-paid cards in New York, cardholders were charged an average $50.12 in activation fees, $69.70 in annual fees, $0.86 cents every time the cardholder used the card at a POS, $1.64 whenever the cardholder used the card at an ATM and $1.44 whenever the cardholder added more money to the card. No credit union issued prepaid cards were included in the survey. [email protected]