Tag: mastercard

PayPal Purge: A Precursor to a United States Social Credit System?

Posted on by Jody Bruchon

In the video above, I discuss the Patreon Purge, the duopoly overlords Visa and MasterCard that are most likely to be pulling the strings of banks and payment processors like PayPal and Stripe to make finance-based censorship happen, and the logical progression of such behavior being tolerated and unregulated: neo-McCarthyism, discrimination against people for political beliefs and political statements by nearly all professions, culminating in industry-wide shared blacklists that could result in everything from no plumber coming to fix a flooding toilet (because a private corporation doesn’t like your politics) to your sick chemotherapy-racked child not receiving a life-saving cancer treatment and dying (because a private corporation doesn’t like your politics.) It’s not unlike China’s social credit system, except it’s going to be implemented by corporate entities instead of the government.

BUT IT’S A PRIVATE COMPANY BLACKLISTING YOU, NOT THE GOVERNMENT, SO IT’S OKAY!

Elaborating on FIPNA: why it’s needed and why money intermediates shouldn’t have freedom of association

Posted on by Jody Bruchon

This was written in response to a comment on YouTube from someone who was trying to understand my FIPNA (Financial Provider Neutrality Act) arguments. It’s not a simple problem and I can see why it’s hard for someone to see the whole picture if they’re not familiar with incidents where PayPal and MasterCard have brought down a censorship hammer in the past. I appreciate their questions far more than the other guy that was talking to me who basically spent the entire time recycling the bogus Limbaugh-level nonsense of calling me a socialist and suggesting that what I want is the same thing as holding a gun to his head and forcing him to do work for me. My full wall-of-text diatribe comment follows. I’d be interested in any comments you have on this subject; just know that comments here are moderated as I find time to do so.

What I’m trying to do is find a solution to the problem of financial services banning people in a way that smacks of collusion. It helps to define the problem better first. Patreon banned Sargon and blamed their “global payment network” which could be any of PayPal, Stripe, Visa, or MasterCard. Sargon moved to SubscribeStar which immediately got kicked off of PayPal as a result. PayPal has also banned a lot of people and categories of businesses in the past, and every time they’d blame a payment card network (Visa or MasterCard) and upon contacting the blamed card network, the contacting party would be told that PayPal was responsible, not the card network. This circular blame tactic results in both parties not taking any sort of responsibility…and yet the financial cutoff on the basis of not liking someone’s category of business remains in place.

The thing about financial service providers is that unlike nearly every other category of private business, a financial service provider or colluding group of them can render someone destitute with the stroke of a pen and existing law carves out huge exceptions for banks to harm people without consequences. A story comes to mind where Bank of America had a customer come in with a scam check and asked if it was legit and, if so, could he cash it out. The bank made him wait and called the cops and had him arrested. He ultimately didn’t get any charges filed but he did get to spend some time in jail and have an arrest record, and he couldn’t sue BofA because the law says that they can have people on the premises arrested without consequences.

Ignoring the banks themselves, the ultimate problem seems to be payment card networks, specifically Visa and MasterCard. All ATM cards that are also members of a payment card network in the USA are (as far as I am aware) issued either a Visa or MasterCard card number. This means that Visa/MC form a duopoly, or what is known in capitalism as a “monopoly of two.” Essentially, any duopoly acting in its own self-interest will end up cooperating such that they behave no differently than a monopoly. The competition that forms the basis of a core element of a capitalist economic system (supply and demand) doesn’t start until you have a third player in the market that directly competes with the other two. American Express and Discover are the other two major payment card networks but I have never seen a single ATM card with either of their logos, and frankly I can count the number of Amex and Discover cards I swipe in a year on one hand. They only compete with Visa/MC in the credit card space and they’re quite minor competition by comparison.

Bringing my point full circle, the Visa/MC duopoly control the payment card networks that the entire country has to use to engage in electronic commerce. Even when you individually consider alternatives like using PayPal with a bank draft only, PayPal still needs to maintain their relationship with Visa/MC for every other customer that DOES use a Visa/MC card, be it a bank ATM card or a real credit card, otherwise Visa/MC will threaten to pull their partnership which would decimate PayPal, if not outright destroy it. This means that if a corporate executive at MasterCard (or someone who knows such an exec and has influence over them, i.e. a wife, family member, or close friend) decides that they hate Sargon’s politics or that Sargon rubbed them the wrong way one night when they were browsing through YouTube, that executive can leverage the banhammer power of the entire MasterCard company to force every downstream payment processor and intermediate money handling platform that has any payment processing relationship with MasterCard to refuse to do business with Sargon under threat of losing the ability to process ANY payments through MasterCard OR any other provider that partners with MasterCard, *potentially up to and including entire banks.*

This is the real reason why Stripe, PayPal, and Patreon seem to be colluding even though they may not be: it’s MasterCard pulling their puppet strings and I guarantee you that we have no access to the payment card network blacklist because the payment card networks will have that blacklist under strict non-disclosure agreements with hefty penalties for breach of that section of the contract. Because MasterCard could theoretically bully any kind of financial institution into doing their bidding and taking the public heat for it, my proposed solution is a law that requires all financial service providers to provide their services universally to anyone legally allowed to request them. The devil is always in the details (for example, loans would still require due diligence and be subject to rejection based on reasonable assessments of risk) but the basic premise is that everyone should generally have a right to open a bank account, get a payment card that can be used to engage in commerce online, and freely enjoy the use of that card as a means to send and receive funds between other consenting private parties without concerns over being “cut off” for any reason other than commission of a crime. When the outrage mob shows up and demands that PayPal cut Sargon’s account because he’s “muh alt-right troll insert emotional buzzwords here rah rah,” PayPal can throw their hands up in the air and say “hey, it’s the law, we HAVE to service Sargon no differently than we service you guys, so you’re wasting your time!”

I’m theorizing to some extent because there is a huge information vacuum right now, but based on all available evidence, Visa and/or MasterCard are the puppetmasters and the fight must ultimately be brought to their doorsteps. One last point: the reason I want a Constitutional amendment rather than a normal law is because a normal law will fail on FIrst Amendment grounds, namely the right to freedom of association, but a Constitutional amendment would be able to supersede the First Amendment right to freedom of association specifically for businesses that serve as financial transaction intermediates (anyone between your personal money and another person you’re trying to do business with being able to receive that money.)

More credit card talk.

Posted on by Jody Bruchon

It’s looking like I can’t tap into the kind of funds I’d like to get without taking those disgusting credit cards after all.  Before I give in to the whole CC thing, I’d like to share some more information on why I don’t want to take credit cards and what I’ll have to do as a very small business owner to deal with the increased cost of business that card-taking entails.

First of all, credit cards take a cut starting at about as low as 1.7% but typically higher, depending on the conditions of the sale and type of card.  “Rewards cards” that give extras such as, say, 1% of the purchase price back to the purchaser work by taking that 1% away from the company that makes the sale.  If I take a normal card for a $100 item, I may lose 1.8% plus a flat $0.20 transaction fee, giving me $98.00 instead; with a 1% back rewards card, I would instead lose an additional 1%, meaning I get only $97 instead of $100 for the $100 item.  Because of these kinds of oddities, it’s almost impossible to determine how much each kind of card costs to process, and therefore how much higher prices must go to compensate (we’ll get into that in a minute.)

One of the newer trends in the banking industry is to give you a phenomenally high-interest account in exchange for swiping your card as credit a certain number of minimum times a month.  You could get an extra 2% interest or so if you swipe your VISA debit card as a credit card at least seven times a month!  Every swipe takes money from me, the business owner, and gives part of it to you via the higher interest rate, and part of it to the bank to make such a program profitable.  You are being actively encouraged to pay as credit, and therefore actively encouraged to rip off the businesses for a few percent of every transaction!  This kind of thing is absolutely dirty, and does not actually benefit anyone but the bank, because the net result is a price inflation at retailers to compensate for the additional loss to the CC companies.  That 2% interest is more than gobbled back up in the form of additional inflation across the board.

It helps to look at any typical for-profit business as some kind of a machine.  It exists solely to make money for its creators or shareholders.  If the business incurs an expense of some sort, it has to repackage that expense into the price it charges to you in order to continue making money at the same rate it was before that expense showed up.  If credit card fees take $300 per month out of monthly profits, the $300 per month has to be rolled into the cost of each product.  How does this work?  The formula is easily found with some simple algebra:

Final cost with CC compensation included =

(Total billed to customer + flat transaction fee) / (100% – average per-transaction % fee)

Plug in values as desired.  For a $3,000 (would-be retail price to you) high-definition television with 7% retail sales tax charged to a rewards card at 4% + a flat $0.30 transaction fee, the business has to compensate for your credit card transaction costs by jacking up the price as follows:

($3000 + $0.30) / (1.00 – 0.04) = 3000.30 / 0.96 = $3,125.3125 =

$3,125.32.

How card fees affect you.

But if you don’t use a credit card, who cares? You do, because credit card companies have a clause in their contracts with merchants that explicitly prohibit charging any kind of additional fee to take credit cards.

That means that, even as a cash-paying customer, a merchant has to spread the credit card “cost of doing business” across all of their products and services. They can’t show card users that card users directly hurt the business every time they swipe a credit card, because that would discourage the use of credit cards and the contract says that’s not allowed. You, the cash-paying customer, are punished for the credit card users’ costs to the business you’re buying from. Isn’t that wonderful? (end sarcasm)

Ultimately, what this means to my business and my customers is that I will have no choice but to increase prices in anticipation of approximately 40%-50% of my sales becoming credit cards.  I’ve actually taken the time to produce a chart of actual prices of some of my store items, from cheap stuff like USB flash drives to entire computers, and how much I will have to boost my prices to compensate, per the above formula.  I assume a 5% rate because with a rewards card and/or large purchase amounts, the rates increase significantly and 5% is not unheard of by any means.

cc-price-increase

It doesn’t look like much at all when you’re dealing with a $13 2GB USB flash drive (the formula I used tacks on $0.89 in my spreadsheet), but the story starts to change when you reach larger orders and higher prices. Our display-model computer system, a brand new and complete unit designed to demonstrate what we can build for a customer, sells for $750. The formula spits out $789.68 as the new retail price I’d have to charge if I start taking cards. That’s basically $40 extra for whoever buys the system! If the person is getting an extra 2% interest for swiping their card seven times a month, and they have $20,000 in savings, I just charged them an entire month’s additional 2% interest on their savings account for that one purchase!  The problem is that I’d have to charge a cash-paying customer the exact same amount because the credit card companies won’t let me take cards at all if I discriminate against their credit cards versus other payment methods.  Granted, there’s the “cash discount” method, where you offer a discount for cash purchases, but that puts you in a grey zone where the CC company COULD say that the cash discount is simply a surcharge by another name, and therefore violates your agreement anyway.  It’s not like you can stop them from terminating your contract with them if you don’t do what they want, after all!

I don’t understand why an average person can be so oblivious–sometimes perhaps even downright ignorant–of “reality as marketed” versus true reality!  If it’s enumerated on a receipt: sales tax, food tax, bottle recycling tax, core charge for an auto part, battery disposal surcharge, government usage surcharge, 911 surcharge, property tax, vehicle tax–people soil their underpants over it, but if the same costs to them are hidden from them–payroll tax, unemployment tax, business liability insurance, “business-class Internet access” (often lower quality than the same residential access, yet for three times the price), income tax matching, and credit card fees–people will happily go along being ripped off.  This is why the government can get away with “we’ll tax the very rich to pay for everything we want to do!” as their excuse for any new government program or expansion of an existing one–no one considers the fact that the ultimate burden to pay those taxes falls on the consumers of a business’s products or services, because the “very rich guy” who runs the company rolls that $125,000-per-year tax on his income into the cost of the products the company sells…but you never know that this has happened and you go on, happily thinking that Joe C.E.O. is paying for your “free clinic” or your “basketball museum” or “free visit to the emergency room” or whatever other “freebie” you’re getting.  Pay no attention to the embedded costs hiding behind the curtain!  Never mind the fact that you’re still paying for the “free” stuff, but the payment you’re making is now hidden and not explicitly stated on a receipt!

Unbelievable.

The next time you swipe a credit card (or vote for a politician that claims an intent to “tax the rich and give back to the middle class” as both recent major Presidential candidates chose to position themselves), remember that you’re the reason that $3,125 television you just bought didn’t cost $125 less.  What can you do with $125?  Maybe buy a Blu-Ray player to hook to said new television?  Perhaps buy some movies or speakers?

Too bad.

You swiped those away.  But it was so convenient, wasn’t it?  And you get a “free” *cough*cough* flight to Hawaii in a year off your rewards points, too!  Yay!

Please educate yourself on what you’re really paying for when you buy something.  Ask any small business owner: “do you have to charge extra on all your products because of the fact that you accept cards?”  You’ll probably get some very consistent responses…or find a business owner that isn’t going to be in business much longer.