Second Ward, Minneapolis

This is the public policy forum of Minneapolis Second Ward (Green) City Council Member Cam Gordon and his staff. We use this space to talk about some of what Cam’s working on, explain his positions, and share a little of what life in City Hall is like. Please feel free to comment on posts, within certain ground rules. See our disclaimer, including ground rules, here:

Friday, January 13, 2012

Taxis Forced to Take Credit Cards

Score one for Wall Street.

This morning, the Council adopted a new regulation on taxicabs.  This appears to be a win for Citigroup, JP Morgan Chase & Co., Bank of American Corp, and various other financial institutions and individuals that make up the owners and shareholders of Visa, MasterCard, American Express and Discover.

But it's a loss for Minneapolis taxi drivers.

This regulation, proposed by Council Member Schiff, will force all taxis in Minneapolis to accept credit cards.  While there are some good reasons to do this - CM Goodman mentioned encouraging drunk folks who may have spent all of their cash on alcohol to take a cab - on balance it's a bad idea.

I believe this because I take very seriously the concerns I heard from taxi drivers during the public hearing.  Many of these folks are recent immigrants (and many live in Ward 2), and they are just scraping by.  Driving a cab is not a lucrative line of work.

They made very clear how this regulation will impact their lives.  Credit card companies, and the banks that are the end of either end of every transaction charge fees for each transaction.  The City cannot require the cab companies to eat these costs, and we cannot require that these costs be passed along to customers.  We have capped the fees that can be charged by cabs, so the total cost of a cab ride cannot rise.

What this almost certainly means is that the credit card transaction (or interchange)  fees will come out of cab drivers' income.  But that's not all.  Many drivers are "independent contractors" who lease their cabs from the companies for a daily fee.  The fee is due on the day they work.  But credit card income does not make its way to drivers for several days or even weeks.  This puts drivers in a terrible spot, in which they will have to pay more to the company for a day's lease than they have actually made that day.  Imagine working all day, only to owe more at the end of the day than you have on hand!

There are other arguments against this regulation.  While some cities have gone in the direction of requiring credit cards, it's clear that most have not.  Council Member Schiff noted that the taxi industry is heavily regulated, as are bars and restaurants.  But we do not require bars and restaurants to accept credit cards, and we shouldn't!  I can't imagine trying to tell the Hard Times Cafe, Seward Cafe, or other Second Ward businesses who do not accept plastic that the City will now force them to.  Council Member Goodman noted that we want more people taking taxis and pedicabs - but we don't force pedicabs to take credit cards either.  Yet.

I want to put this regulation in a broader context.  Who is going to benefit from this new regulation? 
  • Taxi customers that have and want to use credit cards, clearly.  This regulation increases their convenience. 
  • Taxi companies, arguably - more rides mean more business, but those who choose to share some or all of the added cost may also suffer.  
  • The big banks that operate credit cards definitely benefit.  More transactions using credit cards, each subject to a steep fee, will substantially swell their already high profits.
Now, who suffers?  Taxi drivers.

Note that the group being forced to take the financial hit is the least wealthy, more likely to be recent immigrants, and the most likely to be young and people of color.  Taxi customers have to be somewhat well-off enough to take one of the most expensive modes of transportation available (much more than walking, biking, or using mass transit, and usually more expensive than driving).  Taxi companies aren't the most profitable businesses in the world, but their owners are nowhere near as poor as their drivers.  And the big banks are making record profits.

Is this surprising?  Unfortunately, no.  This is a clear pattern of government action at all levels: the transfer of wealth from the bottom to the top. And I regret that our City government is complicit in this as well.

One last thing.  I find fascinating that this Council passed a feel-good resolution late last year, by a substantial majority, in favor of the principles of the Occupy Wall Street protest movement.  Now, a couple of months later, we pass a law that is a windfall for Wall Street, coming out of the pockets of some of the poorest residents of Minneapolis.

I was one of only two votes against this ordinance, joined by Council Member Tuthill, who knows from owning a small business just how onerous the credit card companies' practices can be.


At 4:01 PM, Anonymous Peter Tobias said...


I must agree with CM Schiff that customers in a big city expect card acceptance. I'm sometimes myself the customer of cabs in foreign cities. Taking so cash with me on travel seems risky to me, my searching look is enough advertising that I'm foreign and maybe easier prey. Furthermore, most cab drives are business travel for me, and expense reports by card are much less hassle than cash advances for card-denying cab drivers.

Are taxi drivers forced to take ALL credit cards? Many business take only Visa or Masters (Amex is especially harsh to businesses), and I guess that nearly all travelers have at least one of those two cards with them.

Was there a discussion in the Council to increase the allowable fees for cabs? It seems only fair that, if Mpls wants to gain big city recognition, someone else than the drivers alone should help pay for it.

By the way, Hennepin County is reported to have stopped accepting Visa cards, due to Visa's resistance to allow fees for using a card. That government forces others to do what it doesn't want to do itself (even if they are different parts of government in this case) leaves a bitter taste.

To the Wall street banks winning - well, it's a national problem and could be solved best on the federal level: Visa and Masters are monopolies and shouldn't be allowed to forbid their many smaller business partners not to demand a fee for card service.



At 6:47 AM, Blogger Evan Roberts said...

"The City cannot require the cab companies to eat these costs, and we cannot require that these costs be passed along to customers. We have capped the fees that can be charged by cabs, so the total cost of a cab ride cannot rise"

CM Gordon, why doesn't the city let cabs charge what they like? In cities I've traveled to where cab fares are unregulated the city often seems to have regulations requiring fares to be posted on the outside of the vehicle. This seems to solve the problem of people not knowing what they'll pay before they get in.

At 11:44 AM, Blogger Govardhan Avvaru said...

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