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Four Months Later, Some D.C. Cabbies Still Finding Way Around Credit Card Rules

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D.C. taxicabs have taken credit cards since October, but the transition has been anything but smooth.
D.C. taxicabs have taken credit cards since October, but the transition has been anything but smooth.

Four months after the start of universal credit card acceptance in D.C. cabs, District regulators say most of the glitches that delayed payments and angered drivers in October have been fixed, although some frustration and confusion remains among the city’s more than 8,000 cabbies who are still adjusting to the new landscape of cashless payments.

The original field of nine companies that were approved to process backseat credit card payments has been reduced to six active PSPs, or payment service providers. Since the summer they have locked up most of Washington’s cab companies and independent drivers with multi-year contracts to use their credit card equipment, but interviews with cabbies, regulators, PSP representatives and cab company owners revealed a significant number of drivers continue to try to skirt the District’s new regulatory scheme.

Still using Square
When a veteran taxi driver picked up this reporter at the corner of M and 15 Streets NW on Tuesday afternoon, there was no chance of using his District-approved credit card reader.

“This is my car. Everything is my own. This is my own small business. Just like a restaurant, they cannot tell the restaurant which credit card company the restaurant should use,” said the driver, who agreed to the interview on condition his name not be published.

This passenger’s options were pay in cash or let the driver use the mobile credit card reader Square, a favorite of D.C. cabbies before the new regulations because of its ease of use (the device can be quickly attached to the top of a smartphone and processes a credit card swipe in seconds) and the speed with which fares show up in drivers’ bank accounts. In fact, this cabby only uses Square to swipe his customers’ cards.

But using the device in Washington taxis is illegal because, among other reasons, it does not automatically transfer the District’s $.25-per-ride surcharge to the D.C. Taxicab Commission (DCTC) whose operations are funded solely through such fees.

“Do you think you are a renegade?” the driver was asked. “Renegade? No, no, no. I follow the law. I don’t follow what’s wrong,” he responded.

Square not cool with PSPs, regulators
The CEO of Hitch, a tech startup whose payment equipment is installed in the backseats of 1,600 Washington taxis, estimates that roughly 1,000 drivers across all fleets and PSPs are using Square some or all of the time. Every swipe in a Square reader costs his company money, restricting its cash flow.

“At Hitch we probably have a couple hundred that we call ‘low credit card usage’ drivers and typically they are using Square, or they are covering the machine, or they are telling passengers the machine is broken,” said Hitch chief executive David Miller.

“We have some drivers, when you look at their transaction history, you see they are never doing any credit card transactions. When this happens we pay [the $.25 surcharge] to the DCTC on behalf of the driver for each trip, but we have no way of collecting that money from the driver, so it creates a very difficult position for the PSPs in the city.”

A cabby cannot forever escape paying the $.25 surcharge because every trip is logged by the chip in his or her dashboard meter and recorded by their PSP which, as Miller mentioned, passes the surcharge on to the taxicab commission regardless of whether the driver cooperates. Cabbies who fall behind on paying surcharges risk having their meters shut off and face heavy fines.

“It’s the District’s money and if the cabby refuses to pay it, it’s a felony,” said DCTC chairman Ron Linton.

But there are other reasons taxi drivers use Square: it charges a lower credit card processing fee (2.75%) than its competitors, and it dodges the fee the approved PSPs charge drivers for every single transaction, which ranges from $.10 to $.40 depending on the contract. That fee is charged to cover the cost of transferring the $.25 surcharge to the DCTC and reporting trip data.

“How do we set up the system such that the incentives are in the right place for the drivers to do what is legal? That’s the discussion that needs to be had. Maybe lower the credit card rates below what Square is charging. Maybe we should charge zero credit card rates,” Hitch’s Miller said.

DCTC chairman Linton has no patience for drivers who continue to flaunt the regulations.

“We know there are cab drivers who are using an unauthorized device to handle the credit card payments,” he said. “There is outstanding money that is owed to us.”

Some drivers still struggling to adjust
Outside the offices of Icon Cab in Northeast D.C. Tuesday afternoon, a small group of cab drivers waited for a representative of Creative Mobile Technologies, a New York-based PSP whose system has been installed in more than 1,000 local taxis. Before he had a chance to walk in the door, the drivers began peppering him with complaints about allegedly delayed payments.

“Every time I swipe the card I wait three, four days to see how much he put in,” said cabby Abdul Khair, who brought a plastic bag overflowing with paper receipts. The CMT rep sought to assure him all his money would show up in his account but minus the fees defined in his contract. The CMT employee was not authorized to speak to reporters, but told the cabbies he is always available to speak to them about any issues.

Serge Desmar found himself at Icon’s offices signing up for CMT’s credit card reader because his last PSP, the French company Gleike, went out of business. Desmar said Gleike skipped town owing him weeks of fares.

“I never get any money from them, from the credit card, never. Not a penny. About $1,500,” he said.

As WAMU first reported, similar scenes played out at cab companies across the District for weeks starting in September when glitches with new credit card payment systems left drivers complaining fares were lost in cyberspace for weeks at a time. While the systems generally are functioning better now, some drivers remain confused and angry.

The PSPs are required to process fares within 24 hours after the funds are made available. But if a passenger’s credit card company like Visa or Mastercard does not process the fare transaction for a few days it appears to the driver that the PSP is delaying his payment. The PSP is simply waiting on the bank.

Even drivers who are pleased with their PSP say fees are excessive and explain why some of their colleagues flaunt the rules.

“It’s $48 per month for the equipment, $250 deposit for the equipment, $16 per month for the direct deposit into my account, and ten cents per trip, whether it is credit card or cash transaction,” said Karan Singh, an independent cab driver who uses VeriFone’s credit card reader.

“Why should I have a sleeping partner in my business? That’s my question. What the heck are we getting from the DCTC for $.25? What are they providing us?” he asked in exasperation.

The D.C. Taxicab Commission estimates about one-third of all fares are paid with credit cards. The commission is receiving $50,000 to $60,000 in surcharge revenue per week, a figure that is expected to increase, Linton said.

“The DCTC no longer receives any funds from general taxation. This is a user fee-based organization.”

In the view of the above driver who refuses to follow the rules, the organization itself is illegal.

“This is a free market,” he said calmly.


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