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Credit cards at the Tax Assessor’s office

If you’ve paid your vehicle registration fees in person at the Harris County Tax Assessor’s office, you’ve had to bring cash or check to do so, because they don’t accept credit cards for that. Thankfully, that’s about to change.

Mike Sullivan

Mike Sullivan

More than a decade after the office began accepting credit and debit cards for property tax payments, in person and online, the tax office is preparing to do the same for all things to do with motor vehicles, including registrations and renewals.

Within a month, all counters at the downtown tax office will accept plastic. All 17 locations should be plastic-friendly within three months, [Tax Assessor Mike] Sullivan said, describing the current situation as “horrible, horrible, horrible customer service.”

“It’s going to be a big roll-out when we are able to tell people we accept all forms of payment, bringing the office into the 21st century,” said Sullivan, who took office in January and promised that and other innovations during his campaign. “We’re several years behind where we should be.”

The move is part of a pilot program that will allow the county to input credit and debit card payments directly into the state system. Sullivan said it should reduce the office’s infamously long lines.

The tax assessor said he also plans to post an experienced employee at the front door of each of the five busiest locations to make sure people have all the necessary forms, notarizations and other items to complete their transactions.

While all Texas residents have been able to use credit and debit cards to renew their vehicle registrations online through the Texas Department of Motor Vehicles since 2001, those who visit the Harris County tax office in person have been able to use only cash or checks.

Some county tax offices already take plastic for motor vehicle fee payments in person, including in Dallas County, which first began allowing residents to use credit and debit cards for property and vehicle taxes more than two years ago, a spokesman said.

I pay my registration fees by mail so this hasn’t affected me personally, but as we know long lines at the Tax Assessor’s office is a problem that has needed solving, so kudos to Sullivan for taking this step. It’s a bit mind-boggling to think that in the year 2013 credit cards weren’t an option for something as basic as this – Harris County was one of the first counties to accept credit card payments for property taxes, after all. The state and the way it accepts payments from counties is partly responsible for this, but still. We’re two years behind Dallas. That’s embarrassing. Of course, given who our Tax Assessor was for those two years, it’s not terribly surprising. Consider it yet another reminder that elections do have consequences.

Anyway. Since as noted I do my payments by mail this doesn’t affect me, but it does make me wonder when those of us who pay this way will get the same service as well. It’s not a big deal from a time management perspective, but it would be nice to have the option to pay by credit card. Looking ahead, the next step would be online and mobile payments. Is someone working on an app to pay one’s vehicle registration fees? Surely we don’t want to hear that Dallas has beaten us again. Houston Politics has more.

Mobile payments

Austin is a hot spot for the hot new thing in retail technology.

Mobile payments technology is gathering steam across the country, but Austin is one of the hot spots, both for deployment of new technology and for development of new software for payment systems and payment processing.

Dozens of merchants have affiliated with Square Inc., a well-funded startup based in San Francisco that is winning over smaller merchants with lower credit card processing fees.
Other companies in the field are coming here because of the tech talent base. Mozido, an ambitious payments startup, moved from Dallas to Austin early this year, drawn by better recruiting prospects.

“There is a lot of talent and energy here,” said company founder Michael Liberty. “It seemed like all the good young engineers in mobile who we wanted to recruit either lived here or aspired to live here.”

Brent Warrington, CEO of SecureNet Payments Systems, a payments processing company, moved the company headquarters and its technology development hub to Austin last year from Maryland to tap into the talent pool.

Warrington, a payments industry veteran, said the mobile payments industry is starting to take off after years of more talk than action. “There have been more changes in the payments industry in the last year than I have seen in the previous 15 years of my career,” he said.

Isis, a big joint venture of three mobile carriers, is using Austin as one of two pilot markets for its mobile payments service. The company has brought 1,000 merchant locations on board in Central Texas since the middle of last year and presently is adding about 100 a month. The company is working with Austin’s Mutual Mobile on some software development projects. It is using Gemalto, a big European digital security provider with operations in Austin, for its Trusted Service Manager security.

And PayPal, a veteran of online payments, is adding new workers in California and Austin as it focuses on making mobile payments the starting point for its new software development. The company was recruiting new talent during the recent South by Southwest festivals. The PayPal Austin development center, which is run in conjunction with its parent eBay Inc., employs about 650 people.

A newcomer to town is Visa Inc., a global payments giant, that is building a big software development center on Research Boulevard. The project, which expects to employ nearly 800 people within five years, received approval for state and local incentives late last year. Visa hasn’t spelled out publicly what the Austin development center will be working on, but part of its assignment is expected to be mobile payments.

Other payments companies in town include: Starmount Inc., which develops mobile point-of-sale software for retailers; Bypass Lane, which creates mobile payments systems for public venues and campuses; and Tabbed Out, which develops mobile software for settling tabs at restaurants and bars.

Analyst David Schropfer with New York-based Luciano Group rates Austin among the top cities in the world for mobile payments, taking into consideration the Isis pilot program here and the companies doing software development and market development here.

“Austin is a snapshot into what will happen in the rest of the country and the rest of the world in mobile payments,” he said. “I would put Austin among the top five cities in the world in terms of focus and attention that people are giving to it and the companies that are there.”

Gartner Group, a major tech consulting firm, estimates that global mobile payments will more than triple over the next three years, expanding to an estimated $617 billion. That sounds like a lot, but it compares with estimates that global retail sales will reach $20 trillion by 2017.

The key factor behind the optimistic forecasts is the public’s fascination with smartphones, which are fast becoming the dominant form of cellphone being sold worldwide with an estimated 722 million shipped last year. International Data Corp., another tech consulting firm, expects the number of smartphones shipped annually will double to 1.5 billion over the next four years. Keep in mind that there are presently about 7 billion people on the planet.

It’ll be very interesting to see how this shakes out. I can’t imagine that the market will ultimately support more than maybe two or three mobile payment technologies. People aren’t going to load up multiple apps on their smartphones, and vendors won’t want to bother with systems that their customers don’t use. Will established players like Visa and PayPal suck all the oxygen out of this space, or will the upstarts steal their thunder and become big boys and girls themselves? Place your bets, y’all.

One cannot talk about new technology without also talking about security for this new technology.

Payments industry executives say the technology is good and getting better. But security experts say the swift growth of smartphone use inevitably is going to attract fraud. And as more consumers use their mobile phones as payment devices, the potential risks can increase.

Dallas-based NQ Mobile, the leader in security software for smartphones, says it saw more than 65,000 new malware threats released worldwide in 2012, up from 24,000 the year before. Malware and phony app sites can direct unsuspecting phone users to sites where they give up sensitive personal information, such as bank account passwords.

“It is a real problem, and it is growing,” said Gavin Kim, chief commercial officer of the company. “Smartphone sales are booming, and they are becoming a much more targeted device by hackers.”

The company sells software that can identify mobile phone apps sites and protect users against malware and viruses.

Interest in the mobile phone security software is growing, but the company estimates that only about 8 percent of the mobile market actually uses security products on phones.

Certainly, the threat of malware is there for smartphones – it’s a huge growth opportunity for the bad guys, especially if smartphones become popular for making payments. The back end is likely the bigger target, but I presume that the PCI DSS standard would still apply to mobile payment systems. But threats aren’t limited to just software these days. It’s just a matter of time before there’s a vulnerability in mobile payment systems. Doesn’t mean you should avoid them, just that as with all other things related to computing that you be aware of the risks and take steps to mitigate them.

Fighting identity theft

The U of Texas is studying it.

Identity theft is a cradle-to-grave problem that costs U.S. businesses $50 billion and affects at least 10 million consumers each year.

At least 1 million children’s identities are stolen over the course of a year — often misused by their parents, said Stephen Coggeshall, chief technology officer at ID Analytics. Adults are victimized, online and offline. Companies are compromised when unwitting employees use their company log-ins and passwords surfing the Internet.

Even death offers no respite: One study by Coggeshall showed that the identities of 800,000 dead Americans are being used for illegal purposes.

The Center for Identity at the University of Texas on Monday convened a two-day conference to discuss the scope of the problem and what can be done.

Peter Tippett, who helped create the first anti-virus software, is now with Verizon, which compiles the annual Data Breach Investigative Report.

“We do more computer crime cases than all other companies combined,” Tippett said.

Criminal organizations in the United States, Russia and Brazil are targeting consumers and businesses, Tippett said. He cited a Federal Trade Commission study for the $50 billion a year cost to businesses and the 10 million affected consumers.

Tippett said that 82 percent “of all data stolen by anybody on the planet was stolen because of your password.”

In a world where 123456 remains the most popular password, Tippett said making passwords longer and changing them more often isn’t the answer, with so much hacking and malware.

“If bad guys see what you type, it doesn’t matter how strong your password is,” Tippett said.

He likened the problem with passwords to seat belts in cars. He said seat belts were only 50 percent effective in saving lives, but making them stronger was not the answer. Adding air bags made cars safer.

A second identifying factor needs to be added to the passwords, Tippett said.

Two-factor authentication has a lot going for it, but it’s also another point of failure. One common way of delivering this without having to provide some kind of gadget that contains a personal certificate is to arrange to send an authorization code via text or voice to your phone, which is a great idea as long as you’re never without your phone. I suppose it or something like it is inevitable, though, so there’s no point complaining about it.

One thing this story doesn’t touch on is that a significant factor in identity theft isn’t just careless people with easily-cracked passwords, it’s also the many corporate and government entities that have all your data and which have become lucrative targets for evildoers, or in some cases have screwed up and let supposedly secure data out into the public, as Texas Comptroller Susan Combs did last year. Seems to me there needs to be greater incentive for the keepers of these databases to prevent their theft. One model I often hear discussed is to put the financial onus for this data loss on the entity that loses it and not the individuals who are affected by it. It’s the model we use for credit cards and ATMs, where your liability is limited and the financial institution bears the risk. Those transactions are pretty darned safe nowadays because of that. That takes legislation, which is clearly a tougher row to hoe than convincing millions of people to use better passwords. As the man said, there’s only so much benefit to be gained by strengthening passwords. The back end needs to be shored up as well.

Credit card security

Here’s another thing the rest of the world does better than we do.

The United States is the only developed country still hanging on to credit and debit cards with those black magnetic stripes, the kind you swipe through retail terminals.

The rest of the industrialized world has switched -or is in the process of switching- to “smart” chip-based cards.

The problem with that black magnetic stripe on the back of your credit card is that it’s about as secure as writing your account information on a postcard: everything is in the clear and can be copied. Card fraud, and the measures taken to prevent it, costs U.S. merchants, banks and consumers billions.

The smart cards can’t be copied, which reduces fraud. Smart cards with built-in chips are the equivalent of a safe: they can hide information so it can only be unlocked with the right key. Because the key information is hidden, the cards can’t be replicated.

But the stripes have been so entrenched in the vast U.S. payment system that banks, payment processors and retailers have failed to reach consensus on how to revamp it, leaving the U.S. behind the rest of the world.

“The card system in this country has been dysfunctional for a long time,” says Mallory Duncan, general counsel of the National Retail Federation. “We have far, far too much fraud because we have a very antiquated payment system relative to the rest of the world. This is something they should have fixed a long time ago.”

Changes are coming, and the smart cards will be much more prevalent in the next few years. In the meantime, if you’re traveling overseas, you may want to check and see what your options are, because your dumb card may not be accepted everywhere over there. I don’t have a point to make about this, I just had no idea this was the case and figured many other Americans don’t either. Did you?

Full fees ahead

The cost of doing business for Harris County keeps going up.

Rising credit card fees have increased that portion of the county government’s banking bill by $1.7 million in two years.

In the year that ended in February, the county paid 36 percent more in fees for customers who pay with plastic to cover their tolls and taxes than it did two years before.

The fees are a tiny portion of the county’s $1.4 billion budget, but the higher bills come during a budget crunch that has resulted in layoffs and a hiring freeze. Just the recent increase in fees would be enough to put 31 new sheriff’s deputies on the streets of Harris County. Rising credit card fees were “a large part” of the reason the Harris County Toll Road Authority stopped allowing people to pay airport parking fees with their EZ Tags earlier this year, said Peter Key, the authority’s director.

The Chron story about the EZ Tag debacle did mention the processing fees, which amounted to $70,000 a month, as a reason. Looking back at what I wrote at the time, I must have assumed it was a flat rate that HCTRA was being charged, but clearly that was not the case.

[County Commissioner Sylvia Garcia] suggested that the county consider going out for bids for banking services again next year in hopes of getting another bank to offer lower fees or to pressure Amegy Bank to give the county a better deal.

Key pointed the finger not at Amegy but at the credit card companies as he spoke after the meeting of his frustration over the rising costs.

“They’re just jacking up the transaction fees,” Key said. “The cost ultimately is going to be born by the merchants,” he said, in this case the Toll Road Authority. The tax office, though, passes on charges of $3.95 per Visa debit card transaction and 2.15 percent for most credit cards.

“What has happened is not Amegy but Mastercard and Visa have exponentially increased their fees,” said Edwin Harrison, director of the county’s financial services division.

Indeed, and it’s something that Kevin Drum has written about a few times. Basically, the credit industry soaks the masses to reward the high end users with things like frequent flyer miles and cash back. I’m a beneficiary of that system, but it’s one I’d be happy to see changed, since it’s a huge transfer of wealth away from folks who can’t afford it. Not really something Harris County can do much about, though. Just keep it in mind the next time you hear someone yammer about the unrestrained growth of government spending. There’s an awful lot of it that’s just not in their control.

Toys for tots with valid ID

This is what you call bad holiday publicity.

The Salvation Army and a charity affiliated with the Houston Fire Department are among those that consider immigration status, asking for birth certificates or Social Security cards for the children.

The point isn’t to punish the children but to ensure that their parents are either citizens, legal immigrants or working to become legal residents, said Lorugene Young, whose Outreach Program Inc. is one of three groups that distribute toys collected by firefighters.

“It’s not our desire to turn anyone down,” she said. “Those kids are not responsible if they are here illegally. It is the parents’ responsibility.”

The idea of a charity turning away children because of decisions made by their parents unsettled some immigration activists.

“It is very disturbing to think a holiday like Christmas would be tainted with things like this,” said Cesar Espinoza, executive director of America for All, a Houston-based advocacy group. “Usually, people target the adults because the adults made the decision to migrate, where the children are just brought through no fault of their own.”

Other groups don’t require specific documentation, relying instead on outside groups to recommend families.

“When you distribute toys to 10,000 to 12,000 kids, it’s impossible to background (check) every child,” said Fred Joe Pyland, a Houston police officer who oversees the Blue Santa program. Blue Santa doesn’t consider immigration status but collects names from police officers, schools and churches.

I think Blue Santa’s got the right idea here. I get that you don’t want to give from your limited stash to kids who aren’t poor, or to kids who don’t actually exist, and the way to do that is to get some kind of verification. But this is one of those situations where I think I’d trade a bit of security for a lot more openness. You can say you don’t mean to discriminate against anyone, but I don’t find that very convincing. I’m sure the Salvation Army would rather be touting its new donation mechanisms instead of dealing with this; I hope it serves as impetus for them to change their ways. Stace has more, and click on for a couple of reactions to this story. Thanks to Marc Campos for the link.

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Credit card reform

Good.

Landmark credit card legislation, poised to reach President Obama’s desk as early as Memorial Day, will force the card industry to reinvent itself and consumers to rethink the way they use plastic.

The Senate Tuesday took a critical step forward by voting 90 to 5 to pass a bill that would sharply curtail credit card issuers’ ability to raise interest rates and charge fees. Lawmakers will now turn to reconciling differences with a similar bill approved by the House last month. Swift passage was expected given that the Senate version received so much bipartisan support and that the White House has pressed for action.

When Obama signs a bill into law as expected, the $960 billion credit card industry will go through restructuring that could have broad implications for consumers. (Details of the bill can be found here.)

The bill will prohibit card companies from raising interest rates on existing balances unless the borrower is at least 60 days late. If the cardholder pays on time for the following six months, the company would have to restore the original rate. On cards with more than one interest rate, issuers will have to apply payments first to the debts with the highest rates, which would help borrowers pay off their cards more quickly.

Treasury Secretary Timothy Geithner said the bill “will help create a more fair, transparent and simple consumer credit market.”

The credit card industry is a great example of the consequences of deregulation gone wild. The profits they were raking in above a certain point had little to do with creating wealth and everything to do with transferring it from lower-income consumers to their own bottom lines. This is long overdue, and frankly it should have gone farther. But this is a good start.

When credit cards were introduced about 50 years ago, issuers practiced a one-size-fits-all approach of charging an annual fee and roughly the same interest rate of about 18 percent to everyone. As the industry became more deregulated in the 1980s, around the time that credit scores were introduced, issuers were able to separate the risky from the not-so-risky borrower and tailor the terms of card contracts.

The money they made from customers who did not pay their bills in full each month became an important revenue source. The industry makes $15 billion annually from penalty fees, and one-fifth of consumers carrying credit card debt pay an interest rate above 20 percent, according to figures cited by the White House and compiled from the Government Accountability Office and the Federal Reserve.

To make up for the lost revenue, card issuers will turn to those customers who pay what they owe in full and on time every month, analysts said. Gone will be the days when creditworthy customers enjoyed the benefits of low interest rates and cards that offer rewards such as frequent flier miles and cash back, they said. Annual fees, which had been banished to cards with rewards programs, are likely to return. Offers for zero percent balance transfers are likely to become rarer.

“This industry will start looking more like a one-size-fits-all pricing approach which dominated in the ’80s — 18 percent interest and a $20 annual fees,” said David Robertson, publisher of the Nilson Report, which covers the industry. Customers who pay in full each month will have “to start picking up the slack, to start pulling their weight.”

You mean they’ll change business models to be more like American Express? What a terrible thing that would be, and I say that as one of those so-called “deadbeats” who pays in full every month. Like Kevin Drum, I don’t buy any of the industry’s sobbing, and if I did I’d have no sympathy for them anyway. I mean, come on, if people like me were so bad for their business, why did they never cut me off or change the terms of my credit? So, you know, cry me a river already. Maybe this will force them to innovate in ways that are actually beneficial to the customer.