Yellow Cab Announces Its Back Seat Taxi TVs. By John Han.

Photo By SpecialKRB Flickr

Yellow Cab, over the weekend, put out a stack of flyers at their window for drivers to pick up and read.  The flyers are informing all Yellow drivers about the New York style credit card swipes that will be installed in back seats of all Yellow cabs.  Here’s a full text of Yellow’s flyer…

“The SFMTA, Taxi Division, recently mandated companies to comply with new regulations regarding credit card processing, waybills, and computer records.  We will be installing back seat payment terminals in all cabs and training everyone on their use.  This is an expensive mandate for all companies.  In return, the SFMTA is allowing all companies to shift the burden of credit card processing to an independent 3^rd party processor when they comply with the new mandates.

Yellow Cab Co-op is ready to comply with all the mandates requested and is scheduling to implement the new program by April 15, 2011.  As of April 15^th, 5% will be deducted from all credit card transactions.  There will be NO CHARGE for Paratransit debit cards, Yellow Travel Cards, or vouchers.

Credit card transactions have more than tripled over the past 5 years.  Credit card business has reached almost 30% of our total business and is growing rapidly and has become a heavy burden for Yellow Cab to bear.  Hopefully, we will be in a better position to invest in better equipment and services for our 1,500 drivers. 

THE MANAGEMENT”

(Yellow Cab)

Well, this comes as no surprise to me.  I’ve been actively participating and watching taxi policies develop over the past couple of years.  So I knew that taxi Tvs were on their way because Hansu Kim and Christiane Hayashi kept saying so, and that drivers who are currently getting charged nothing for credit card fees would soon be getting charged 5%.  So that’s nothing new.  The same will go for every company.  It’s industry wide. 

But the way Yellow’s flyer is worded, it seems to be calling the backseat credit card Tvs a ‘mandate’ put forth by the SFMTA.  Is it a mandate?

Yellow’s flyer, in the way that it’s worded, seems to imply that the City has mandated these Tvs, that the cost to install the Tvs is expensive, therefore Yellow, and other companies are being allowed by the SFMTA to pass credit card fees onto their drivers.   As a result, the companies may use the money saved from the SFMTA’s waiver to pay for the installation costs of the new equipment.

Really?  If that were the case, Yellow’s flyer would actually resemble something that has fairness. 

In actuality, Yellow, and all cab companies, as I understand, have been offered a ‘waiver’ by the SFMTA that would allow them to rid themselves of rising credit card costs, and pass those costs onto taxi drivers of up to 5%.

Let’s first look at how currently, SFMTA regulations require all cab companies to cash credit card payments for drivers without charging them back a processing fee. This is an excerpt from SFMTA taxi regulations as it is currently posted for public viewing on its website.  

“A Color Scheme shall provide cashiering services to any Driver for credit and debit card transactions collected by that Driver as payment of taxi fare while that Driver was driving a vehicle affiliated with that Color Scheme, and shall not charge a Driver for any merchant account processing fees for fares paid by credit or debit card.”

(San Francisco Transportation Code Section 1106(p)(6))

But in August of 2010, the SFMTA put out a draft memorandum informing that companies would be offered a waiver of that regulation.  It read….

“As you are aware, the San Francisco Transportation Code Section 1106(p)(6) currently prohibits taxi companies from passing on credit card merchant fee costs to taxi drivers.  However, due to the very recent, rapidly expanding use of credit and debit cards in taxicabs, and in consideration of the fact that taxi companies do not receive increased revenue from the increasing proportions of taxi fares that are paid with credit and debit cards, there has arisen the need to reconsider the allocation of merchant fee costs amongst the participants in the San Francisco taxi industry. The Board considered the issue at its meeting of July 6, 2010, and authorized SFMTA Taxi Services staff to waive the prohibition of Section 1106(p)(6) against taxi companies passing on merchant fee costs to drivers under the following conditions:

1.  That the taxi company seek and obtain prior written approval from the

SFMTA to pass credit card merchant fees to taxi drivers in advance of a

violation of Section 1106(p)(6); and

2.  Such waiver is granted as a limited pilot program until such time as it can

be reviewed by the Taxi Advisory Council, and

3.  Any cost for credit card transaction cashing services that is passed on to

drivers pursuant to such waiver not exceed six percent of total credit card

fares for that driver, and

4.  Such waiver must provide convenience and/or other services to both taxi

customers and drivers that demonstrably improve the quality of taxi

service to the public and driver working conditions, and

5.  Such waiver shall not include any change in fees charged to customers

who pay taxi fare with a Paratransit Debit Card, and

6.  Such pilot program remains subject to future regulatory actions by the

Board of Directors.”

(SFMTA Draft Memorandum, August 2010.  Bold italics mine.)

You can read the full draft memorandum HERE. With respects to “backseat payment terminals”, or Taxi Tvs, the memorandum continued,

“3. Advertising and Allocation of Advertising Revenues:

(a) The purchase and installation cost of initial and replacement/warranty

equipment shall be recovered first from advertising revenues, and shall not

be charged to color schemes or drivers.”

(SFMTA Draft Memorandum, August 2010.  Bold italics mine.)

According to this memorandum, albeit a draft memorandum, the installation costs of the Taxi Tvs, were to be paid for by new advertising revenue generated by the Taxi Tvs themselves. 

Secondly, SFMTA is not necessarily mandating Taxi Tvs and thus allowing companies to pass credit card fees on to drivers to pay for installation, as Yellow’s flyer implies.  It’s more the reverse.  Taxi companies want to get rid of their credit card costs, and SFMTA is letting them do it in exchange for electronic waybills, and even Taxi Tvs. 

If it turns out that Taxi Tvs can actually pay for themselves through Taxi Tv ads, then according to this memorandum, taxi companies would be allowed through the SFMTA waiver to pass credit card costs onto drivers, and at the same time use new advertising revenue from the Taxi Tvs themselves to pay the installation costs of the Taxi Tvs.  This means that money saved by passing credit card fees onto drivers is new money for companies, and may be allocated elsewhere.

Could Yellow, by passing credit card fees onto drivers, and at the same time receiving ad revenue from Taxi Tvs, be saving significantly more than a million dollars a year for itself?  And how would Yellow and other companies spend their new money?  Would they offer medallion holders more money?  Would they pocket it for their own savings and retirement? 

The SFMTA, in exchange for electronic waybills and backseat Tvs, has dealt to the cab companies, new money to play with, while passing along added charges to drivers.

Note another excerpt from the memorandum about ad revenue from the Taxi Tvs…

(b) Advertising revenue in excess of that needed for equipment costs shall be

shared 50-50 with the driver of the vehicle.

(c) Advertising revenues shall be reported to SFMTA quarterly.

The proposed 50/50 split in advertising revenue highlighted in the memorandum above, I believe, was the SFMTA’s attempt to recognize that it had just dealt away a degree of drivers’ protections under the SF Transportation Code, and it was trying to reconcile.

Drivers, who had previously been protected under SF Transportation Code Section 1106(p)(6) prohibiting credit card charge backs, would now be charged up to 5% for credit card fees.

However, at the last Taxi Advisory Council meeting held Monday, March 14, 2011, Deputy Director of Taxi Services Division Christiane Hayashi confirmed that the 50/50 split had been changed, and that the final split would be 90% going to the cab company, and 10% going to… not the individual driver as originally proposed… but to the overall Drivers’ Fund, and that these changes are final.