Wednesday, June 1, 2011

A Commentary On Sonali Bose's May 6th Memo To The MTA Board Of Directors, Regarding Credit Card Fees And Rear Seat Payment Terminals (Shortened Version). By John Han.

Photo by John Han.

Sonali Bose, the MTA's chief financial officer, wrote a memo dated May 6th to the agency's Board of Directors, regarding credit card fees and rear seat payment terminals.  

To get to the point, the MTA states  these reasons as purposes for rear seat Passenger Information Monitors (PIMs).

PIM units provide customers with the benefits of security of a rear-seat credit card payment system, improved passenger information, promotion of local businesses and potential advertising revenue.  Without a PIM unit there is likely to be a variety of different payment methods depending on which taxi the customer uses).”

(Memorandum:  ” Credit Card Charges:  Follow Up on Taxi Issues Raised at the April 5, 2011 Board Meeting”, May 6th, 2011.)

The following is my response as a driver to the purposes stated. 

1)  Promotion Of Local Businesses: 

There are five separate reasons stated above for PIMs.  Two of them are directly related to advertising.  The first advertising statement is “promotion of local businesses”.  That’s all fine and good.  San Francisco could do well to encourage the growth of local businesses, and most likely, so could the businesses.

However, when implementing taxi policies, San Francisco must hold in high regard California’s law requiring it to, “protect the public health, safety, and welfare”.  (California Government Code Section 53075.5)   A good example of a government meeting this requirement would be ensuring that a motor-vehicle-for-hire is safety inspected, insured, and that a driver is licensed.  Another example could be requiring all cabs to accept credit cards and debit cards as payments for fares, etc. 

However, it is arguable whether San Francisco’s new requirement giving passengers exposure to video advertising and promotion of local businesses while riding in a cab, necessarily regards the standard very highly for, “public health, safety, and welfare”, or whether that shouldn’t be classified as something else.  The MTA is allowing third party entities to operate their own advertising businesses inside of taxicabs while taxi drivers (independent contractors?), are driving those cabs.  The advertising part of these third party businesses are clearly distinguishable from cab service, and may be more neutral in its purpose to “protect the public health, safety, and welfare”.  Therefore, this seems like more of a business deal, similar to advertising on Muni buses and bus stops, rather than an interest to protect the public.  Nonetheless the MTA is making the taxi drivers pay for the equipment that will serve as the billboard for these ads. 

Additionally, the so-called “independent contractor” taxi drivers could never negotiate with advertisers, a percentage of revenue from the advertising, as part of any deal between them. 

2) Potential Advertising Revenue:

To whom would the revenues go?  According to the New York Times, those revenues would go almost entirely to the credit card service providers like Verifone, which has reportedly increased revenue by 60% in one year due to rear seat PIMs.  And Bose, in her memo, states a discrepancy regarding the revenues. 

She states that in October of 2010, the Taxi Advisory Council amended the SFMTA credit card waiver to require,

a ten percent contribution of advertising revenues generated by the PIMs to the Driver Fund.” 

This is highly misleading though, as it suggests that the Drivers Fund would benefit from ten percent OFF THE TOP OF ALL AD REVENUE, and thus taxi workers are helped out in that way.  However, Deputy Director of Taxi Services Christiane Hayashi, in her final memorandum to the MTA Board of Directors dated October 15, 2010, states something entirely different.  In her memo regarding “Processing Non-Cash Payments In Taxis” she states, “Ten percent of advertising revenues in excess of those required for equipment installation and maintenance shall be paid into the Drivers Fund”  (Memorandum, October 15, 2010:  Processing Non-cash Payments In Taxis” Bold italics mine).  There could be a BIG DIFFERENCE between an amount that comes from skimming 10% right off the top of all ad revenues, as Bose’s statement implies, vs. taking 10% of whatever’s left after equipment installation and maintenance costs for PIMs have been all paid for, as Hayashi’s memo states. 

(Note:  As a Drivers’ Representative on the Taxi Advisory Council (TAC) I have asked during a Council Liaison’s report for a breakdown of the 5% fees and how ad revenues would be divided up between the vendor and the Drivers’ Fund, and whether cab companies could take a percentage from the ads, thus reducing revenue to the Drivers’ Fund.  I thought that my question was a valid one.  But the answer from the Deputy Director was crass, to the effect of, “It is of no concern to the SFMTA how the 5% fees would be broken down between vendors and cab companies.”

Additionally, during a town hall meeting, director Hayashi had written on the white marker board, and told taxi drivers, that the Drivers’ Fund would receive 10 percent of the add revenue from PIMs.  She did not explain to the drivers however, that the 10 percent only meant 10 percent of what would be left after installation and maintenance costs, thus allowing drivers to be misled.)

The MTA Board of Directors should note this discrepancy, as we the drivers are not privy to the breakdown of these statistics.

3) The Benefits Of Security Of A Rear-Seat Credit Card Payment System:

What’s the relevance of a “rear seat credit card payment system”?  What exactly are the benefits?  And what are the problems that this solution fixes?

The MTA’s statement regarding “security of a rear seat payment system”, fails to state what negative and overwhelming incidents the agency has documented over the years, and what common injuries have incurred again and again, against San Francisco passengers having to hand their credit cards to their taxi drivers for a fare, inasmuch as their needs to be a solution to a front seat system.

Nonetheless, the MTA is making drivers pay to solve some ‘crisis’ that apparently exists with front seat credit card systems. 

4) Improved Passenger Information:

This is the only purpose listed amongst the five that has any merit.  However, if Yellow Cab’s PIMs are any indication, the information that the MTA is talking about is merely the same information posted on the pink placards on the sides of taxi interiors.  They display meter rates, phone numbers, compliments and complaints access, the meter-and-a-half rate policy, etc.   I guess that’s good for when a passenger can’t read the small print on the placard on the side of the interior.  Then they could look on a screen. 

But this doesn’t justify making drivers have to pay to have entire rear seat PIMs installed.  Especially when a vast number of drivers do not want them, and there’s enough riders in New York who think ads on these PIMs are annoying.  Plus, disputes over things like, say, a meter-and-a-half rate rarely occur.  If they do, drivers could simply point to the information already posted on the taxi’s interior for proof.  If the print is too small, then the MTA could mandate that all cab drivers keep an 8 1/2 X 11 inch laminated notice in their work packs that could have the same information printed on it with brail access. 

We are already required to carry in our work packs a map, a copy of the regulations, flashlight, etc.  This would be one simple addition to our work packs, and preferable over rear seat PIMs.

5) Without A PIM Unit There Is Likely To Be A Variety Of Different Payment Methods Depending On Which Taxi The Customer Uses: 

This is false, or at best, not necessarily the truth.  But at this level it is a moot issue. 

If the MTA continues to go forward with the credit card waiver in its current form, it is not by any means a guarantee that all thirty-one or so of the color schemes in San Francisco will voluntarily participate under the waiver.  Therefore, if that were to be the case, then not all cabs will have PIMs, and the industry under the waiver would lack uniformity in payment methods. 

As the MTA memo states, there are only five companies so far that have voluntarily complied to participate in the waiver.  Where are the rest?  The companies that so far have not come forward to participate, how are they processing their credit cards?  And in what manner are they charging their drivers for processing fees?  The waiver does not crack down on these problems. 

The MTA’s memo states that, “Drivers at most companies are already paying unauthorized and unregulated credit card processing charges of five to ten percent or more”.  Since that’s been going on, and few would deny that it has been going on, then where is the evidence that the MTA’s waiver changes that? 

At this point no one is certain. 

But here is something that is fairly certain…

The immediate effect of the waiver is that it allows the larger companies like Yellow, Luxor, and DeSoto etc., that are more scrutinized by the government, and under pressure to comply with regulations, to stay competitive with smaller, less regulated companies, that have profited illegally by charging their drivers for processing fees under the radar.

That’s because in this case, the waiver lets bigger companies to now pass their credit card fees onto their drivers also, but lets them to do so in a way that keeps them in compliance with regulations.  That would be in contrast to the way smaller companies have been profiting illegally by charging their drivers credit card fees regardless of regulations. 

It does not, however, ensure uniformity in payment methods as Bose’s statement suggest to the Board of Directors, as uniformity would require ALL companies to install PIMs, which means all companies would have to voluntarily come under the waiver.  The likeliness of this happening is uncertain. 

If the City wanted PIMs in all cabs for uniformity’s sake, it may have to mandate PIMs in all cabs rather than issue them under the voluntary waiver.   But PIMs should be abandoned altogether. 

1 comment:

  1. The smaller companies are going to install PIMs
    as it is a requirement by MTA that if you want
    to collect 5 % from the drivers, you must install
    these PIMs. Who will not do it ? Everyone will
    do it becasue there is a 5 % at stake otherwise.
    This deputy director of the Taxis has destroyed
    the system and further damage will be felt soon
    by the drivers.


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