As the litigation between banks and merchants over debit cards is still in process, the skirmish between PIN and non-PIN use of debit cards continues. This summer two banks launched sweepstakes to encourage non-PIN, or signature, use of debit cards, while a major card processor and terminal manufacturer have teamed up to offer a payment terminal designed to promote PIN debit card use.

Concord EFS and Hypercom launched a snazzy new payment card terminal that prominently displays the STAR network logo above the terminal's keypad, and automatically prompts the consumer to enter a personal identification number when a debit card is used for payment. The red STAR Universal Terminal is designed for use by small and medium retailers and supports all types of payment cards, including VISA/MasterCard debit cards and smart cards.

MO-based Commerce Bank re-launched a promotion called "Skip the PIN - and Win!" which automatically enters the bank's debit cardholders in a $1,000 weekly drawing and a $25,000 grand-prize drawing each time they use their VISA Check Card and sign for their purchase rather than entering their PIN. FL-based BankAtlantic has also rolled out a debit sweepstakes called the "Bank Atlantic Check Card PowerPurchase Sweepstakes" which offer cardholders using signatures instead of PINs on VISA Check Card purchase transactions, a chance to win a PT Cruiser. BankAtlantic also offers a rewards program for debit card use.

The battle over PIN and non-PIN use of debit cards is driven by the disparity in the fees merchants pay to accept either transaction. Merchants generally pay less than 25 cents to accept a PIN debit transaction, while the fee for a non-PIN debit transaction averages about 1.9%. There are approximately 150 million VISA and MasterCard debit cards currently in use in the U.S. that may be used with a PIN or with a signature-only (non-PIN) for purchases.

For consumers there is no direct cost difference between using a PIN or not using a PIN. However consumers receive added value with non-PIN purchase transactions. Under many VISA and MasterCard debit card programs, consumers receive extra perks such as rewards based on purchases, extended warranty, price protection and purchase insurance. Also consumers benefit from additional consumer protection rules and the security of "back-up" authorization limits, based on the customer's account balance.

The debit card lawsuit was originally filed in October 1996 by Wal-Mart, Sears and eleven other retailers. The suit contends retailers are victims of an illegal tying arrangement, under which merchants are forced to accept VISA Check and MasterCard MasterMoney non-PIN debit cards under VISA and MasterCard's "Honor All Cards" rule. The retailers also contend that VISA and MasterCard conspired to monopolize the debit card market for consumer purchases and suppressed the growth of competing regional ATM/POS network payment systems. No trial date has been set yet and the parties are still awaiting a final decision on the class action status of the lawsuit.

MBNA FBI

The former top law enforcement officer in the U.S. is headed for the nation's second largest credit card issuer. MBNA America this month offered former FBI director Louis Freeh its top security position and admission to the inner circle of its top management. MBNA insists Freeh was hired for his management skills in running a large organization. However as senior vice chairman for Administration, Freeh will be responsible personnel hiring, legal affairs, and facility security. Freeh's personnel functions include recruiting, hiring, education, compensation and benefits for the company's worldwide workforce of 26,000 people. Mr. Freeh will oversee all of the company's legal affairs. He will also be responsible for the company's facilities, which include more than 6 million square feet of office space at 36 locations throughout the world, and the bank's security and transportation functions. MBNA has already hired three other former top FBI officials.

MERCHANT FEES

A new study of merchant fees by MD-based First Annapolis found that merchants pay far more than just a fee for each transaction. Among other fees encountered by merchants: chargeback fee between $10 to $20; voice authorization fee between 25 cents to $1.00; application fee of at least $50; a monthly minimum fee of $10 to $20; a statement fee of $5 to $10; and a termination fee of at least $100.

VISA BIZ PARTNERS

VISA U.S.A. announced this month the addition of Thrifty Car Rental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Staybridge Suites by Holiday Inn hotels to the VISA Business Partner Advantage program. Thrifty Car Rental is offering a 20% discount off all VISA Small Business rates on car rentals. Crowne Plaza, Holiday Inn, Holiday Inn Express and Staybridge Suites hotels all provide up to a 14.5% discount off corporate rates at participating hotels. VISA has 6.5 million Business cardholders nationwide. Current cardholders and potential customers alike can learn more about the program by visiting www.visa.com/partneradvantage or calling (800) 520-8472.

MASTERCARD SPAIN

Spanair announced this month a free companion ticket offer for MasterCard holders. The special offer entitles U.S. purchasers of a round-trip business class ticket, using a MasterCard, to a free companion ticket. Complimentary limousine service is included in the offer. The offer applies to Spanair flights from Washington Dulles International Airport to Spain. Tickets must be purchased by August 15 to qualify. Passenger and companion must book at the same time and fly on the same itinerary. Tickets must be purchased by August 15, 2001 using a MasterCard card. The offer is valid only for USA MasterCard cardholders and must not be used in conjunction with any other promotional discount offer. For more information contact, Spanair at 1-888-545-5757.

CARD INSURANCE SUIT

J.C. Penney and Dutch insurance giant AEGON, have been named as defendants in a class-action lawsuit filed on behalf of a Corpus Christi woman who unknowingly was billed for insurance premiums on her credit card for six years. In August 1999, the woman was seriously injured after being struck by a car. After discovering the coverage, her son filed a claim under the credit card insurance program and was automatically rejected. According to the 13-page complaint, telemarketers began contacting customers in 1987 about the ADD insurance program with the promise that they would receive information in the mail, but were under no obligation to purchase insurance. However, customers of the direct response solicitation program were enrolled automatically. In fact, no signatures were required to activate the policy. Some customers were told that premiums for the first three months would be paid for them. What they were allegedly not told was that the defendants made withdrawing from the program nearly impossible, and any refunds were "capped" at two or three months, no matter how long premiums had been paid.

LATE FEE SUIT

Sub-prime credit card specialist Cross Country Bank was named in a lawsuit filed this month in Palm Beach County Circuit Court by a Sarasota, Florida woman who says the bank purposely mailed monthly statements late, then held payments too long. Another recent suit filed on behalf of 450,000 Cross Country customers in California, seeks a refund of $68 million in application fees and annual charges. Plaintiffs' attorneys charge that Cross Country tricks customers into accepting cards by advertising credit lines of up to $2,500, when, in fact, the average credit limit is $432, and the maximum credit limit for a new customer is $800. The FDIC has reportedly received more than 5,000 complaints about Cross Country since 1997.

MYSTERY CHARGE SUIT

Two Florida women filed three class action lawsuits against firms they say were responsible for mystery charges on their bank statements. One of the women claims she was left penniless for weeks. The suits were filed against Sylmark which markets the Abslide product; GoodTimes Entertainment which markets Richard Simmons products; the Lane Bryant Catalog; and national telemarketers MemberWorks and Synapse Group. In the suit, the two women stated they had ordered items over the telephone but were later billed for unwanted products and services after specifically refusing the additional offers.