A Parking Processor Gets into a Political Fender-Bender with Sen. Durbin

A 13-cent fee increase from Parkmobile USA Inc., a specialty payments processor for parking providers and municipalities, drew heavy fire last week from U.S. Sen. Richard Durbin, chief sponsor of the Durbin Amendment in 2010’s Dodd-Frank Act that imposed price controls on most debit card transactions. The brouhaha is the latest example of the unsettled nature of low-value debit card payments since Visa Inc. and MasterCard Inc. in late 2011 turned Durbin’s transaction price cap on cards issued by large banks, which the senator intended to lower merchants’ acceptance costs, into a flat fee that actually increased retailers’ costs for accepting small debit card payments.

Parkmobile might not have raised the powerful Illinois Democrat’s ire had the increase occurred anywhere but Washington, D.C. The Atlanta-based company disclosed the fee change at the same time that it introduced a new mobile-wallet service for the District of Columbia, where it has provided pay-by-phone service for more than 17,000 on-street parking spaces since July 2011.

In announcing the wallet on Oct. 23, Parkmobile said it was increasing its 32-cent transaction fee to 45 cents “due to increased cost related to the Durbin Amendment.” The fee, which is paid in addition to the parking charge, applies only to parkers who continue to use existing payment options. Customers who use Parkmobile’s new mobile wallet will be charged only 30 cents.

“We would like to encourage our members to sign up for the Parkmobile Wallet as it will decrease the transaction fee, and simplify parking transactions,” Parkmobile chief executive Albert Bogaard said in a news release. “We wanted to provide [the District Department of Transportation] and our members with a solution that would not only make parking easier but also offer a relief from the impact of recent federal legislation passed by Congress.”

The release also quoted District Transportation Director Terry Bellamy saying, “Unfortunately, changes outside our control have caused credit card fees to rise, but Parkmobile has found a solution for customers that protects them from paying higher transaction fees.”

The fee increase quickly drew a double-barreled response from Sen. Durbin. He fired off a letter to Bogaard, saying, “My amendment did not raise these fees, it put a ceiling on them. Visa and MasterCard raised your fees, and as a merchant you were helpless to stop them short of the ceiling the new law created.” Durbin also faulted Bellamy for referring to credit card fees when his amendment regulates only debit cards.

Durbin asked Bogaard to retract “these misleading communications and provide your customers with a clarification that sets the record straight.” Parkmobile would not comment to Digital Transactions News, but the release was still posted on the company’s Web site as of Tuesday afternoon.

The senator also wrote to D.C. Mayor Vincent C. Gray. “It is inappropriate for a contractor, using District resources, to offer up incorrect, unsolicited legislative analysis while hiding behind poorly reasoned excuses for their own price hikes,” he wrote. Durbin called the quote from Bellamy “troubling,” saying it created “the impression that the District of Columbia government associates itself with the misleading views that Parkmobile has expressed.”

Durbin is in a position to put heat on the mayor because he chairs a subcommittee that oversees federal funding to the District. A District spokesperson told The Hill, a Washington political newsletter, that, “It’s pretty clear that DDOT shouldn’t have used Parkmobile’s analysis because that’s not their job,” he said. “This is a debate between Parkmobile and the senator.”

Then the Merchants Payments Coalition, a retailer group lobbying for lower interchange, got into the act on Monday. “While Parkmobile initially blamed the Durbin Amendment, it retreated and changed its explanation when a customer complained,” the MPC said in a news release. “In an e-mail obtained by the MPC, Parkmobile wrote to a customer:

‘The card brands and large issuing banks weren’t too happy about having their debit interchange fees capped. So, they responded by raising regulated debit interchange fees to the cap across the board without regard to transaction size. The result is that businesses with a small average ticket no longer get special treatment on regulated debit transactions. This is especially damaging since debit cards are used far more frequently than credit cards to pay for small transactions. In Parkmobile’s case, payment processing costs have tripled because of these changes.’”

Parkmobile declined to comment about the MPC’s release.

Redbox, the DVD-rental company, raised its basic charge from $1 to $1.20 in the wake of the new Visa and MasterCard small-ticket debit interchange flat fee. Vending machine network operator USA Technologies Inc. recently announced the extension of an agreement with Visa Inc. that gives it pre-Durbin interchange rates.

Durbin’s price cap of 21 cents plus 0.05% of the sale and another 1 cent for fraud control applies to transactions on cards issued by financial institutions with more than $10 billion in assets.