Verizon's audacious new fee for on-line payments | Hacker News Reader

Verizon's audacious new fee for on-line payments

money.cnn.com

85 pointsraymondh73 comments

So somebody, somewhere in the company figured out that they could save/make $X billon by charging a $2 "convenience fee" or getting their customers to switch over to ACH transactions thus saving 2% - 3% they're losing to credit card companies ... and since customers are frequently locked in by contracts ... or with hardware that won't work on other networks ... or don't even know what a routing number is ... they're captive.

Class action lawsuit ... lawyers get paid ... customers maybe get a coupon for something useless in a year or two, or maybe nothing at all ... and the world keeps spinning.

Maximize shareholder value! Beat those quarterly estimates! Make your customer relationship more difficult! Can you hear me now?

Thanks for writing my catharsis for me. Fucking exactly.

I can't wait until we're past this moronic "maximize short-term pennies along with long-term loathing!" mindset.

One of the first things taught about negotiating is, unless you're about to leave the planet never to return, don't make one-sided deals. Eventually they catch up with you, if only because no one wants to work with you anymore. It's such a valuable lesson. When will corporate America realize there's more money in the long game?

When bonuses get paid out in terms longer than quarterly, or yearly.

Short-term: Maximize shareholder value.

Long-term: If you're an executive and you haven't taken your compensation and moved to greener pastures, bribe the government to crush your better serving competition before they get the customers and the money.

It's cynical, but one has to at least consider that the reason is because there isn't more money in the long game. Over time all markets become commoditized, which is sort of a "one sided contract" in the consumers favor. This kind of cheating can be seen as attempt by the service providers to fight that trend.

Oh, there's still money in it. Just not at the margins that Verizon has grown accustomed to. And I think this sort of commodification is still a long way out. The capital necessary to build the nation's largest wireless network is only available to a handful of companies.

I think "Corporate America" has been in this game for at least a hundred years, possibly longer. I'm not saying I agree with it, but obviously the negatives aren't as bad as you think they are; Corporate America seems alive and well and ready to continue another hundred years. Let's hope we can regain control of our "representatives" in government soon.

I think it began in the 1980s in the era of "corporate raiders".

I think you're mostly right; that's when it got really big. But it began long before...

Standard Oil, United Fruit Company, JP Morgan, DuPont, CitiBank, Associated Press, Pfizer, Macy's, and I haven't even gotten to the Civil War era yet.

   http://en.wikipedia.org/wiki/Corporate_raider
   http://en.wikipedia.org/wiki/List_of_oldest_companies#1825_to_1851
   http://en.wikipedia.org/wiki/Wall_Street#Nineteenth_century

The median tenure of an operationally involved CEO at a large public company is 5 years. For a lot of CEOs, the long term doesn't exist.

I believe any change in a cell phone contract, such as a new fee, allows you to terminate the contract without penalty. Of course 99.9% of customers won't do that, but it is an option.

It has to be a material change... this might not constitute one, especially if the contract says Verizon is free to add or remove payment methods or something along those lines.

I bet they'll claim in-person payment remaining free will render the change meaningless from a void-contract point of view.

If the contract doesn't explicitly state you get to use a credit/debit card, then they're not really under any obligation to accept it at all, much less for free. After all, you can always do it the old-fashioned way and mail in a check.

I don't agree with that. When I signed my contract with Verizon, they offered online payments via credit card as a free-of-charge option for payment. By charging for that, they are materially changing the nature of our agreement, regardless of whether it was in the contract.

Take it to the extreme: Since method of payment isn't stipulated at all in the agreement, they could just as easily say "Starting 1/15/2012, any payments not made in person at our payment processing facility in Kodiak, Alaska will be subject to a $100 convenience fee." Would that be ok? At what point does it become not ok?

IANAL, but I would expect the uniform commercial code to cover what payment methods are allowed if not stipulated in a contract. For example, in § 2-511 of the UCC (http://www.law.cornell.edu/ucc/2/article2.htm#s2-511) "Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it."

I'm not sure if leaving out such a demand in the contract bars them from making one in the future, or if a court would recognize such a right when it is unreasonably burdensome on the part of the consumer, however - or if they would allow the payer to offset their costs incurred in delivering the legal tender to the payee. That said, if anyone knows of case history regarding this, it would be very interesting to read :)

Since the fee is easily avoidable I would guess it's not "material" in that sense.

Then there's the second way they get you. The $300 phone you just bought for Verizon only works on Verizon... :(.

From the discussion of this on reddit, it seems to depend on whether or not the contract allows for addition or modification of "fees" and others implied that it could vary by state. Of course, IANAL and there were no sources cited anywhere.

I left 10 minutes ago to find the link and got lost, I'm not sure where it went.

This is exactly the definition of maximizing short term gain for long term pain. Customers need to be able to vote with their Feet (and dollars) to nip this kind of idiocy in the bud. I hope this extra fee makes all existing contracts breakable without penalties or early termination fees.

The degree of cynical "squeeze more blood from the turnip" thinking is sickening.

Here's the beauty of being Verizon: your phones are CDMA or derived technology, and will not work on any other carrier that does not wish to explicitly allow 'your' phones, and you easily can and do disallow other carrier's CDMA phones to work with your network. Your customers might be out of your current contract, but the only way they can get connected is to sign a new one.

At the risk of sounding like the old guy crabbing about how easy the younger generation has it, do you remember when there were no mobile phones? When you left the house or the office, you were just basically unreachable. If you needed to call someone, you had to find a pay phone and hope you had change, maybe if it was a real emergency you would call collect. You paid per call, and if long distance was involved it was on the order of dollars. For ONE call.

Texting, mobile apps, the ability to call anyone from pretty much anywhere all unlimited, with the phone itself amortized into the monthly bill, for what? $30 a month? $40, $50? A BARGAIN.

And it's not like this fee isn't easy enough to avoid. Sign up for the recurring plan, or pay with an ACH, or send in a paper check if you think YOUR time to deal with a paper bill, write a check, find a stamp, address an envelope, and trek out to the mailbox is worth less than $2.

Do you remember when there was no internet? Does that make unadvertised throttling by deep-packet inspection okay?

Do you remember before there were internal combustion engines? People used to ride horses everywhere! It'd take days to cross the state.

Back in my day, we had to get the local messenger to traverse the plains of ye olde England to give word to townsfolk when we had a contrarian point of view we wanted to express. Even then we were lucky; most other people were decried as heretics and publicly hanged. And that was before Cromwell.

Now we pay £15 a month to be able to click a button and do it instantly. And it's not like this £15 isn't easy enough to avoid when you can travel to a country with medieval values and hire a messenger to do your bidding.

Bloody kids these days.

I cancelled a 4 year gym membership over this. They wouldn't allow credit card payments anymore, only bank drafts. Not giving a gym access to my checking account. Some MBA figured wrong when they ran the numbers on that change.

Much as I like to jump on VZW, I don't think that Verizon should be vilified for this one. By my back-of-the-envelope math, Verizon is passing on the cost of credit-card processing to their customers, and no more (2% CC processing fee on a $100 phone bill == $2).

I would much prefer to see customers realize how much they are gouged by credit card companies every day. Some small businesses (e.g. gas stations, the deli on the corner) already do this, and I'd like to see other large businesses follow suit. It's time for people to realize the sorry state of payments at-present, perhaps opening the way for a better alternative. Some are saying that Verizon is abusing their captive customers, but I see this as Verizon trying to escape captivity as a customer of Visa, MC, and Amex.

Are there charges for debit transactions, and if so are they comparable or less? If so why hasnt someone come up with a way to debit vice cc online.

Humbug! CC fees, while annoying, are a cost of business which should already be included in the math they use to determine what I'm paying them each month.

If they had to mail out a paper envelope & invoice and then pay somebody to handle my check back to them, do you think that would cost them more or less than $2 each month? I'm thinking it would be pretty darn close to $2 to deal with that.

Should they be adding fees to my bill every time I visit their website, so that they can cover those costs too? Should they be charging me every time I contact a customer support representative?

This is as indefensible as Bank of America's ATM fee.

I've been a 5-line Verizon customer for at least 4 years, I've been out of contract for at least a year, and I'm calling them in the morning to express my extreme displeasure at this. If they don't reverse course on this I'm switching to Republic Wireless.

Given Verizon's size, 2% seems a little high, but it's sort of within the range of reasonableness. That said, I see this as nothing more than a way to get a few million dollars per month for doing nothing. If it were really to cover CC fees, as you say, then consider the following:

1) This isn't a new service they are offering, and CC fees are nothing new. Why only start charging now?

2) The fee is actually only charged for some CC payments - recurring payments or in-store payments, which would still be subject to similar CC fees, do not incur the $2 fee.

3) Since the CC fees that were being borne by all are now solely borne by those using CCs (well, some of them at least), why are customers utilizing cheaper payment methods not given a credit?

"The fee will help allow us to continue to support these single bill payment options ... and is designed to address costs incurred by us for only those customers who choose to make single bill payments,"

Isn't running a for-profit company supposed to address costs associated with taking customers money? Convenience charge could simply be translated to a "because we can charge".

I don't get this explanation at all. It isn't like credit card companies just barely started charging processing fees. And, on the other side, customers who utilize the less expensive payment methods aren't being given a credit for saving Verizon money.

Not only that, but the recurring credit card payments will incur similar processing fees for Verizon, but won't cost you $2.

Part of me sometimes wonders if there is some club where CEOs of large corporations are having a game to see which one can get away with the most ridiculous fee/price hike, with bonus points for using a patronizing explanation for it.

Not quite. A convenience charge is a naked, unbridled contempt charge.

They do because they can, and nobody will stand up for you. Nationalize. Banish the execs to Monster Island. Start over.

> They do because they can, and nobody will stand up for you. Nationalize. Banish the execs to Monster Island. Start over.

Right, because having one company works so much better than having several, and because governments do so much better at listening to their "customers", and because you can always stop paying if you don't like the service. Oh, wait, none of those things.

If they were charging for ACH payments I could understand the outrage. But passing through some of the credit card fees they pay hardly seems to be a capital offense. The only reason you don't see lots of companies passing through the cost is that their agreement with VISA et al forbids passing through the cost (which is why this is characterized as a convenience fee and is not exactly equal to the credit card fees they pay).

Simply put, there are more important things to complain about than this.

The problem is, they don't charge for recurring credit card payments. Only one-time. And as someone who's signed a lot of merchant account agreements, there aren't different charges from Visa/MC/Amex for recurring payments vs. one-time. The fees are the same--this is just a ripoff from Verizon.

We (ISP) switched from authorize.net to ippay because they had much better rates on recurring payments. They claim to be able to process with a telco/recurring flag that has much lower fees. All I know is our fees went down a lot: www.ippay.com/index.php?q=ippay

Might explain why vzw wants to push people to recurring payments.

Customers who have recurring payments set up are undoubtedly cheaper to service than one-time payers. They're less likely to fall behind on their bills, and getting customers to pay up after the fact costs money. This sounds like a reasonable charge to incentivize recurring payments.

A recurring payment, though, is more likely to fail. For instance, if a card is at the limit, a recurring payment simply fails, and then you've got to find some way to notify the customer that they need to address the issue.

Someone coming to your site to pay his bill, on the other hand, gets notified right away if there is a problem and so can get right on addressing it.

Also, when people get new cards they often forget to update places that have the card on file, leading to much hassle for the vendor.

Another advantage of customers who are paying month-by-month at your site--you have up sell opportunities that you don't have with customers who are on recurring billing.

For a service that the customer considers to be reasonably high priority, I suspect that the combination of less billing attempt failures and the extra money from up sell attempts make the month-by-month manual customers actually cost less to deal with then the recurring customers.

Though I agree with the GP, I don't understand how one-time online payments cost them any more than recurring ones.

One thing customers should be aware of: when carriers change the terms of your contract, you are normally free to cancel your service without paying an early termination fee. For many people, this can amount essentially to a massive discount on your phone.

I want to see more research on this topic. If this is true, I'm happy to do it. I pay every month online via credit card, which was a PitA as it was...this is flat out silly.

There is a great deal of case-law governing material changes to contracts, in particular: materially ADVERSE changes. Despite what may be in your ISP contract, case law takes precedence. Many changes to pricing, service, etc. offer you the opportunity to refuse the new terms without being penalized by existing terms such as the termination fee. [insert standard IANAL disclaimer here]

You just need to know a few tricks of the customer service phone center game. Do these steps in order, stop whenever you get your way. Note that you must be willing to go all the way.

0) Make sure that the company only has a single payment mechanism on file for your account: a credit card

1) Call the company

2) Slam zero, pound, star, shout "AGENT" a bunch, and throw in a few swear words to trigger the system to send you to a live person ASAP

3) Ask to speak to someone in account management; preferably a retention specialist

4) Mention the materially adverse contract change

5) Tell them you'd like the change not to apply to you

6) Threaten to terminate your account, unless they provide an agreeable alternative offer

7) Refuse termination fees on grounds of materially adverse contract changes

8) Assure he operator that you will issue a chargeback for any such termination fees

9) Authorize cancelation of service

You should also keep a timestamped log of every person you speak to. This includes both their informal name and some kind of unique identifier, such as a phone extension number. Your log should include every material claims/fact you provided them and they provided you, especially specific numbers and identifiers, such as prices/rates, case numbers, and descriptions of processes.

Follow up: After you get your way. Call them right back!! Get someone else on the line and ask them to read to you your case notes. Call operators will lie to you to get you off the phone. Your case isn't resolved into someone totally different reads the case log back to you as you expect it to be. When you call, don't hint to them that you don't trust them. Tell them you got disconnected & ask them to read back the log aloud so that you are both on the same page. You don't want the new operator to be tainted by putting you on hold to go talk to the old operator.

Thanks for that. Looks like I'll have to wait to use it - they've rescinded the fee.

It's true. Read your contract.

I'll never understand this. It costs them less to process my charge online in terms of manpower, and is at least as cheap if not cheaper on charges incurred for them upstream.

This is the truest definition of 'convenience charge' though, as they are, in fact, charging you for convenience. As a Verizon customer who has been considering dropping their cable service for some time (due to Hulu, Netflix, Amazon, etc.), I'm now giving thought to dropping them as an internet provider as well since we have a lot of good options in Maryland. I do love their internet service, but I hate bullshit charges that don't at least make sense.

I'm interested in the good internet options in Maryland that you speak of. My mom lives in Montgomery County and is looking to switch from RCN.

Comcast in this area has exceptional customer service, and actually offers decent broadband speeds. It isn't the Fiber Optic internet that Verizon FiOS gives me, but it's certainly good.

Also had Comcast in MoCo, definitely solid internet, overall pretty pleased.

Comcast is great if you want to give your money to a SOPA supporter.

Thinking of the differences between the situation in the U.S. and western/central Europe (which I'm somewhat familiar with):

Cellular, and anything else to do with physical infrastructure, might be the few cases in technology where the size of U.S. market works against creating value for the consumer. In most everything else, having access to a common market of ~300 million people is awesome; it's not so awesome when you have to be able to service a substantial amount of them to get critical mass.

Wondering: in Canada, we have upstart cellular operators competing by offering lower prices for service covering only the largest urban areas of the country. So if you're in Toronto, Vancouver, and Calgary (and a couple of other places), you have more choice, in Flin Flon not so much. Anything like that in the U.S.?

Flin Flon? Canada is awesome.

Mostly, we have ATT, VZW, TMO, and Sprint duking it out over most of the customers, while second tier carriers (regional, usually) and MVNOs clean up the scraps. Not too many are doing much of note in terms of disrupting, although there are a few on the horizon. I think that a lot of it has to do with spectrum - there just isn't enough for upstarts, so they end up riding on the main networks of the big 4, or reselling them as an MVNO.

I really wouldn't hold up the Canadian mobile industry as better than the US. It's one of the few markets actually worse than the US (data, call charges, etc.).

The US has regional or urban carriers; often they're MVNO, or have some local infrastructure and use another big carrier for other areas.

They're mainly confined to the low end/poor/no credit market. Until recently, they barely had featurephones. Probably the big ones are Virgin Mobile, Boost Mobile, and MetroPCS.

> I really wouldn't hold up the Canadian mobile industry as better than the US. It's one of the few markets actually worse than the US (data, call charges, etc.).

That's what I keep on hearing. But I also keep on hearing about $60, $100 smartphone bills in the U.S., and the last time I paid that much was on a shitty contract with Rogers in 2010. When I signed that contract in early 2009, there were no better options - I had to sign up for a year if I wanted Blackberry push email, and it didn't matter that I had my own phone (carrier subsidy $0).

Now I pay $29 for unlimited local voice, unlimited text, unlimited-with-an-asterisk data, contract-free. My starting costs were a used $200 Nexus One and a $25 SIM card (much too much, but whatever). My carrier right now has a promotion with unlimited Canada/U.S. voice for $40 and unlimited text/data. The catch is that I would pay extra for service in the boonies, but I don't need service in the boonies. At the very least, I have the choice; does your average Android owner in the Bay Area or in Seattle, if so, what are the choices?

I was under the impression that credit card providers basically say "you can't charge extra for paying by credit card".

What would happen if Visa or Mastercard said "you're in violation of our terms, we're cancelling your merchant account"?

I believe those terms got banned in one of the financial reform bills of the past two years. They're not allowed to prohibit discounts for other payment forms anymore.

Perhaps it's this one:

> (a) With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.

http://www.fdic.gov/regulations/laws/rules/6500-500.html#fdi...

Looking at Visa's current terms, they don't seem to run afoul of those regulations - but Verizon is still violating them. Visa says you're allowed to offer a discount to non-credit-card payments, but it has to be presented to the customer as a discount for cash/gift card/e-check/whatever payment, rather than as a surcharge for paying with your credit card.

If that is the case then this change would have to be a 2 dollar increase to all bills and then removed if you pay not using a CC. In which case this would be a material change to the contract.

From the article: "Customers can still enroll in a service that will debit their bank accounts or charge their credit cards on a recurring basis for free."

We're going to need to break up the telecoms again. AT&T and Verizon are too big to offer halfway decent service.

This seems like the kind of problem the open market should solve. Unfortunately, competing with Verizon isn't about the $2 convenience fee, it's about the nationwide 4g network.

Every company has a right to make a profit, however they will have to provide value for it. This is a value reducing proposition. If reddit thinks Godaddy is evil, I'm excited to see what happens with this.

IANAL-Is it possible to set up a class-action lawsuit on this? We, Verizon customers, entered into a 2-year contract agreement. Now, in the middle of that contract, they are changing the agreement. At the least, shouldn't they be forced to wait until a customer signs a new contract to institute new fees?

Perhaps someone with more legal experience can chime in. As a Verizon customer who just signed a new 2-year agreement, I'd be willing to join the class and spread the word about it.

I assume they will respect any existing contracts. The class action stuff around fees has generally been because the provider misrepresents the nature of the fee. For instance, they advertise a $39 a month plan, but then throw in a pure revenue surcharge with a description that makes it look like a federal tax.

Sprint kinda did the same thing. Seems they hid it better tho -- http://www.sprint.com/spendinglimit 4th paragraph mentions the charge. Anyone who didn't sign up for auto-pay is charged an extra $5 a month, even if you pay on time.

I have Verizon set up in bill-pay through my bank. When I send them a payment using this method, is this considered a "one time" payment? The article is not very clear on that. I don't have an automatic recurring payment setup, I send the payment manually every month via my bank account.

No, you don't get charged by using your home baking bill pay system.

Thanks

Bill payment through your bank will not incur this charge.

Bank of America, NetFlix, GoDaddy and now Verizon.

Companies in 2011 that suffered self inflicted wounds to their brand.

time for everyone to start paying by paper check -- let's see how long it lasts :)

Playing devils advocate: could this be a revolt against the credit card companies over their fees, rather than an attempt to screw the customer?

I'll do the same thing I did with godaddy and leave. Verizon was already on my shit list for tracking every website I visited via my phone.

This is a god damn outrage. To what point will corporate america keep pushing the envelope until consumers revolt?

Reply on news.ycombinator.com