THE ROLLS ROYCE STORY: ON AMERICAN EXPRESS

The introduction of Air Miles in 1992 caught retailers from one end of the country to the other completely by surprise .  There are thousands of stories about the ends to which some people will go to save a few dollars or even a great many dollars; to others it's a game, a rough game played with money. One of them involves the buyer of a Rolls Royce from a dealer on the Central Coast, as we call it here in California.

Soon after the announcement that American Express would "bribe" people to use their plastic cards with travel credits, if they would forgo the use of cash or checks in transactions, a woman bought a new Rolls Royce and put the entire purchase price of $164,000 on her card.  The dealer must have been in shock, because the normal charge of 4% on a purchase of that size would be $6,560.  If the customer had witten a check, there would not have been any charges.

The mark-up on cars is not a lot compared to other things, but let's say it is in the area 15% of the total amount of the sale, or approximately $24,600 to the dealer*.  That's 26 1/2% of the profit.  Any car dealer losing that much to American Express on new car sales would go broke within the year.  This story may be shy of the exact details, but it certainly wasn't any secret either.  Now there are many who will argue that these are sales incentives, but did the buyer need a sales incentive, did 164,000 points or credited miles mean so much that this was the motivation for buying that Rolls Royce?  No, that buyer saw, through the American Express program a way to take an undue and unintended advantage of the car dealer from that car dealer's point-of-view.

No car dealer in his right mind would make a deal like that unless he had been sand-bagged, and that is what obviously happened.  Dealers all over the country got his and stuck because of those bank contracts; they're own local banks were forced to use them and enforce them.

This is the reason why the Credit Card Cartel carried on all the planning and conniving in deep secrecy for months in an act of collusion to commit the crime of bribery, then hit the retail world with this program, advertised misleadingly as an incentive program to bring buyers into the retailer's place of business, but in reality merely a scheme to enrich themselves at the business owner's expense.

*Okay, if you think I'm wrong, then figure it out for yourself and give me an answer. 

Another story, but not a Rolls Royce this time:

If the Air Miles campaign did one thing, it enabled, taught and encouraged people to cheat and chisel with plastic.  It made bribery a part of our culture, where it had seldom been before.  It is now firmly entrenched in our business system, in the minds of the buying public. 

One of my friends, an auto dealer too, told me the following story.  One of his customers wanted a particular car he had for sale and bargained him down to his lwwest price, talking a cash deal or in other words, I'll write a check for payment in full and it is done.

That's a clear understanding, isn't it?  Is there any room for doubt?  When all was said and done, he said to the dealer, "Jim, I have to transfer some funds at the bank and I'll bring you a check tomorrow." That's also a clear understanding, again, a check for $13,000.

However, the following day he came in and laid down a Visa card and asked Jim to put it through on plastic.  Jim refused, as that meant an additional ciscount (cost to him) of $260.  The customer called the bank and made a complaint and from there the situation escalated.  According to the contracts the banks enforce, if a card is offered, if must be honored, the retailer has no choice.  It does not matter to Visa, to MasterCard, to American Express, to Diner's Club, or the others how devious, lying or cheating the card holder is, if you have those logos on your door, you MUST honor that card.  You're going to lose $260?  That's tough, but they'll enforce it.  You've got those spindly, grasping fingers around your wallet and they won't let go.

Well, so that it would not happen again, Jim had to take the decals off of his front entrance windows and put them only on the window of the Parts Department.

In those early days of Air Miles millions of dollars were sucked out of the profits of retailers nationwide, but it was the car dealers who suffered pretty heavy because they were unprepared for the duplicity and the cunning of the Charge/Credit Card Cartel.

Microsoft is being sued for racketeering by Best Buy customers (May 12, 2007) because they're being improperly charged for MSN service which it secretely activated when the customers purchased with a credit card.

It is my contention that incidents illustrated above were also a form of racketeering, that Visa and Mastercard induced people into criminal acts by these bribes.  They dangled the carrot of Air Miles or other Awards and when cardholders accepted the circle of the con was completed.

The Auto dealers news had many such stories submitted to it during those days, and today, on a new car, many will accept a partial payment, limit of $1,000 by credit card, where they face only a $20 or $40 loss.

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