SCOTUS to Hear Credit Card Surcharge Case

The U.S. Supreme Court on Sept. 29 agreed to hear arguments from a group of New York merchants who want the right to impose surcharges on purchases made with credit cards. The outcome of the case could have an effect on laws in 10 states that restrict such surcharges.

The Supreme Court granted a writ of certiorari the merchants filed in May 2016, after a lower court upheld laws banning such surcharges—which the retailers say are necessary to offset swipe fees imposed by payment networks.

The group of five merchants—which includes a Brooklyn ice cream parlor and a hair salon near Binghamton—claimed in its petition to the Supreme Court that banning surcharges is a violation of the First Amendment’s free speech protections. Although all states allow merchants to charge a higher price to customers who pay by credit cards, 10 states have laws that govern how those price differences can be communicated. New York law allows merchants to offer a discount for cash payments, but makes it a crime—punishable by up to one year in prison—to impose surcharges on credit card purchases. “Liability thus turns on the words used to describe identical conduct—nothing else,” the merchants argued in the writ.

The New York case dates back to 2013, when the retailers challenged the law in U.S. District Court. U.S. District Court Judge Jed Rakoff ruled in the merchants’ favor, agreeing that the surcharge ban prohibited free speech. New York state, however, appealed and, in September 2015, an appellate panel reversed the decision. That led the retailers to petition the U.S. Supreme Court to hear the case. The Court said it will hear the arguments in the case during its upcoming term, which begins Oct. 3 and ends in June 2017.

Merchants in other states also have argued that surcharge bans violate the First Amendment’s free speech protections, but the New York case is the first to reach the nation’s highest court. In 2015, merchants in Florida successfully used a free speech claim to strike down that state’s ban on surcharges—a decision that echoed a similar ruling in California. A Texas appellate court upheld that state’s surcharge prohibition in March 2016. The merchant plaintiffs in the Texas case also filed an appeal to the Supreme Court, but the court has yet to decide if it will hear that case.

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Image Credits: Blake Everett

Green Dot’s Secured Credit Card to Help Credit-Challenged Consumers

To help consumers build a credit history or improve their existing credit scores, Green Dot Corp. launched Sept. 29 the Green Dot Platinum Visa Secured Credit Card. Being a secured credit card, the credit line is backed by the cardholder’s security deposit held with Green Dot Bank. Because Green Dot reports customers’ payment history to the three major credit bureaus, customers can eventually improve their credit history with responsible card use. The card program also enables consumers to pre-qualify without impacting their credit score and it offers free online account management.

Consumers fill out a short application to see if they’re approved for the card. If approved, Green Dot will inform the consumer what their maximum credit limit is, up to $1,000, and the card is mailed to their home. Cardholders can fund their security deposit with cash at any of Green Dot’s thousands of locations, including Walmart, 7-Eleven, Walgreens, CVS and Dollar General stores. The minimum deposit is $200 and the cardholder’s credit limit is equal to the amount of the deposit. Customers can make their monthly payments at a retail location or using Green Dot’s free online bill pay. The card has an annual fee of $39 and 19.99 percent APR.

“The secured credit card is one of the best tools on the market to help the 100 million credit-challenged Americans build or improve their credit score, which is a critical component of financial health,” John Thompson, senior vice president at the Center for Financial Services Innovation (CFSI), tells Paybefore. “In particular, Green Dot’s new secured credit card appears to address one of the biggest challenges for secured card adoption—funding the security deposit. By offering an affordable minimum balance of $200 and allowing consumers to fund the deposit with cash or check, this product may help more financially struggling consumers to start improving their credit scores and improving their financial health.”

The new Green Dot card isn’t the first time a prepaid card provider has tried to bridge the gap between GPR prepaid card usage and establishing or improving credit scores for consumers. For example, in 2014, the U.S. Treasury and Banking Up, a New York City-based GPR card provider formerly known as Plastyc, began working on an ongoing project to help determine whether providing consumers with a prepaid card and a secured credit card can improve their access to consumer credit. Also, Suze Orman, the television advocate for personal financial responsibility, helped create the now-defunct The Approved Card, a Mastercard-branded GPR prepaid card. Orman had been working with credit bureaus to determine whether cardholder behavior on the Approved Card could help consumers build credit.

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Global Card Base Grows Nearly 6 Percent, Nilson Says

The number of credit, debit and prepaid cards in global circulation increased 5.8 percent year over year in 2015, hitting 18.08 billion, according to new research from The Nilson Report. That total includes private label credit, debit and prepaid cards for stores, fuel, airlines and medical.

Of the total card base, global brand general purpose cards accounted for about 60.79 percent at the end of 2015. Domestic general purpose cards accounted for 5.53 percent, while private label cards accounted for 33.69 percent.

The report also said that:

“By 2020, payment cards are expected to increase 21.3 percent to 21.93 billion,” said David Robertson, publisher of The Nilson Report. “Mastercard and UnionPay are projected to be the only global general purpose brands to increase their share—Mastercard growing 67 basis points to 9.37 percent, and UnionPay growing 248 basis points to 32.57 percent. RuPay and Elo are projected to lead domestic general purpose cards, collectively gaining 96 basis points to 2.79 percent.”

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CFPB Slaps Fines on Two Lenders in Two Days

Within a two-day span, the CFPB ordered two companies in separate cases to pay a total of more than $12.6 million in civil penalties and refunds. The agency levied a hefty $9 million civil penalty Sept. 26 against auto title lender TMX Finance for providing consumers misleading information about terms and costs to steer them into costly loan renewals. On Sept. 27, the CFPB took action against online lender Flurish Inc., dba LendUp, for not delivering on the promised benefits of its products, and the agency imposed a $1.8 million civil penalty and ordered Flurish to refund approximately $1.83 million to more than 50,000 consumers.

The CFPB determined that TMX Finance employees would offer consumers a monthly loan payment option, but then offer a “voluntary payback” option that entailed smaller payments over a longer period of time by repeatedly renewing the loan. The total costs of the loans weren’t explained and employees steered consumers to the more costly “voluntary payback” option, according to the consent order.

Savannah, Ga.-based TMX Finance, which has more than 1,300 storefronts that go by TitleMax, TitleBucks and InstaLoan in 18 states, also used illegal debt collection tactics by having employees go to customers’ homes, neighbors and places of employment to collect past-due debt. During these visits, employees would reveal past-due debt information to family members, neighbors, roommates, coworkers and supervisors, according to the consent order.

“TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” said CFPB Director Richard Cordray. ”They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk.”

San Francisco-based LendUp, which offers single-payment and installment loans in 24 states, began marketing its loans and financial education courses in 2012 as a way for consumers to build credit, improve their credit scores and eventually qualify for loans through LendUp with better terms. However, the CFPB determined that the company didn’t offer some products in states where it advertised, gave consumers inaccurate information about the true cost of loans and didn’t always properly provide information to credit reporting bureaus, according to the consent order.

The California Department of Business Oversight assisted in the investigation that showed “persistent failure by LendUp to comply with California consumer protection laws,” according to a Sept. 27 announcement by the DBO. The company agreed to a $2.68 million settlement, in which $1.62 million will refund customers charged illegal fees and interest. The remainder will go toward a $100,000 penalty and more than $965,000 to cover costs.

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People on the Move: Robert Payne, Bango

U.K.-headquartered mobile payments provider Bango has selected Robert Payne to serve as executive vice president of strategic partnerships. Based out of the company’s expanded Silicon Valley office in San Jose, Calif., Payne has more than 25 years of experience in the mobile and financial services industries. That experience most recently came from Danal Inc., which he helped grow into a leading carrier billing provider in the U.S. market and a leader in digital identity technology. Payne also has consulted for Boku Inc. and held executive roles at Element Capital, social networking pioneer Buzzlogic, Silicon Valley Bank and Wells Fargo Securities. He began his career at Ernst & Young.