New Fee from Visa: FANF

Adjustments in the rates and fees that the Card Associations (Visa, MC, Discover & Amex) charge are made in October and April. Last fall debit fees were radically reduced for regulated debit card sales due to the Durbin Amendment legislation. Regulated debit cards are issued by banks with assets greater than $10 billion. More good news came when Visa announced new rates for charitable organizations that greatly reduced fees for credit card donations.

On April 1 of this year, Visa announced a new fee called a Fixed Acquirer Network Fee (FANF). This is an industry wide fee and will be assessed by all merchant service providers throughout the universe. The only exception granted by Visa is to nonprofits with the Merchant Category Code of 8398, indicating they are a charitable/social service organization. Though we cannot eliminate this fee, it will be passed through at cost without any profit margin or mark up.

Visa’s formula to determine the fee amount is based on many factors, including the merchant category code, number of locations, gross sales volume, how cards are accepted and the business type etc. The fee will range from a low of $2 to over $125/month based on sales volume and number of locations. Visa will rebate the fee to nonprofit organizations with a Merchant Category Code of 8398 (charitable and social service organization). The rebates are issued immediately each month, so qualifying non-profits will see the FANF as well as the rebate on the same statement.

Our opinion on this and other excessive fees

We are compelled to offer our opinion on the above mentioned and other fees that have come to pass in recent years. It is difficult to understand the rate increases and additional fees that the Payment Card Associations have come up with given the primary members’ (Visa and Mastercard) monopolistic dominance in the market. To be clear, it is the card issuing banks that are setting policy. In setting policy, various class action lawsuits, other litigation, market pressure, security issues, even government regulation have a bearing on that process and thus on the cost increases. As a result, the various parties in the credit card processing space are challenged to maintain integrity alongside profitability. Adding to that is the incumbent perspective of maximizing profits and not doing what is best for their customers. We definitely feel this is an unsustainable system.

Thankfully the US Justice Department has taken notice of the excessive nature of the fees and is investigating!  We don’t believe Visa’s excuse that this fee is as a result of last year’s Durbin Amendment, which forced issuers of debit cards to reduce the fees that merchants pay for accepting regulated debit cards. The intention behind that legislation was actually to give relief to cardholders, but the government in its misunderstanding of the industry did not realize that consumers would never see a penny of savings. Furthermore many merchants did not realize a reduction in their fees as many merchant service providers did not pass the savings on to their merchants. Of course you know that Dharma did and we are grateful for that reduction in your costs. We hope the Justice Department can help reduce or eliminate the FANF as well

Until then, here at Dharma we are feeling dismay and disappointment in yet another fee by one of the card associations. We know that the merchant services industry suffers from a reputation of unethical and deceptive practices when it comes to rates and fees. While all merchant service providers have to cover the same costs that are set by the card issuing banks, we see many cases of exorbitant fees which are endured due to agreement terms that are never divulged.

Dharma Merchant Services was created to change this practice. Having recognized that the fee policies are out of the hands of those who are subject to those fees, the least we can do is offer fair, ethical margins and full-disclosure agreements. We also seek to offer value beyond the commodity of receiving card payments by building community, treating you as a human being, and bringing integrity and compassion to the intersection of technology and commerce.

We’d love to hear your voice on this issue and are glad to open the conversation. Please share your comments and feedback!