Loyalty Truth

The continuing battle over the regulation of interchange has yet to hint at a winner. The battle lines are clearly drawn and each side of the debate between banks and retailers makes a sensible case, until you read the opposing view. For the average consumer, that is exactly the problem.

At first blush, many consumers may soften to the argument made by retailers and others who favor the legislation. The banks are painted as evil, wicked, mean and nasty and their excessive swipe fees are portrayed as a tax that is about as fat as Wall Street bonuses.

Before the retailers are able to firm up a victory, the banks make solid points that retailers in other markets, Australia is the favorite one cited, did not share their savings on interchange by lowering prices. Worse yet, the banks make clear that they will have no choice but to raise fees on all sorts of checking and savings accounts to make up for their diminished margins. Even Russell Simmons has joined in to advocate for the bank position.

Who is speaking is almost as interesting as what is being said. Every public dispute has a spokesperson, and JP Morgan Chase has either volunteered or has been elected by the others. Even though PNC, Regions, and SunTrust have announced attenuated benefits with their debit card rewards programs along with Chase, it seems to be Chase that is leading the campaign to scare the wits out of consumers based on Durbin being implemented as currently proposed.

Follow this timeline with me for a moment

• On January 14, industry news outlet PaymentsSource reported that Jamie Dimon, CEO of JPMorgan Chase, told stock analysts during a quarterly earnings call that up to 5% of banked consumers might be forced out of the system if financial institutions raised fees to make up for the proposed reductions in debit card interchange
• On March 10, industry sources reported that Chase and possibly other big banks were considering a cap on debit card transactions of $50 or $100
• On March 15, Chase announced it was terminating the Chase Ultimate Rewards program due to pending Durbin passage
• On April 15, Chase announced that is was not planning to discontinue Ultimate Rewards in light of the federal government’s decision to delay enactment of interchange fee cap rules

This series of announcements may unfairly paint Chase as a manipulative bad guy in a fight where surely other banks are standing behind the curtain and cheering them on. Regardless of the messenger, the message itself is confusing and a bit frightening for consumers. Is it enough to make them call their Congressman and lobby for the bank’s point of view?

Interestingly, the retail lobby has managed the fight through associations and has kept any one retailer from standing in the spotlight. This tactic might tell you how vulnerable every retailer feels at the moment. The economy continues to recover and none of them wants to be the “voice of the industry” – and subsequently the target of consumer ire.

Watching this battle unfold is like being a bystander at your parent’s divorce. The arguments all too often spill out into public and the selfish interests of each parent seem to overwhelm the welfare of the children. American consumers, those that are following and understand the substance of the debate, are gathering the idea that their interests are secondary in this brawl.

It might be time for the two “parents” to empathize with the damage being inflicted on the “children”. It is possible that regardless who wins this fight, consumers will dig their cynical heels in further, making “loyalty” a very difficult task to achieve.