Pearl River      One of the major advances enabling modern unionization was the employer payroll deduction system for membership dues.  Rather than having to hand collect dues from members at the workplace or union hall, an authorization from a worker means that the dues amount is deducted directly from the worker’s paycheck and remitted on a regular basis to the union.  The ease and efficiency of the system is one of the reasons that many employers balk in bargaining, as well as why conservatives in red states and other countries, have blocked the system for public employees, whenever they have the chance.  Unions have been forced to come up with alternative systems via bank drafts and credit cards.

Community organizations like ACORN, that are membership-based and rely on member dues, don’t have the luxury of accessing a payroll system, so have to rely on various money transfer programs to receive dues.  Credit cards are certainly one way, if the member has a credit card, but it’s pricey and rather than automatically rolling over month by month, year by year, involves some hassle when the companies issue new cards with new numbers forcing a redo with more time and attention.

Receiving online donations isn’t an easy solution either, especially in the United States, and especially for nonprofits, like ACORN and others.  An email that hit my in-box the other day, noted that, “Considering that more than $500 billion is donated annually in the US, you’d expect it to have the most competitive processing fees in the world.  Instead, the opposite is true:  American nonprofits pay more than those in almost any other country.” 

            On Stripe for example, which is the leading online payment processor in the US, my correspondent noted that “nonprofits pay an average transaction fee of 2.2% for Visa and Mastercard donations and 3.5% for American Express.  But in Australia, Stripe charges just 1.4%.  In the UK and …the European Union, it charges only 1.2%.”  What the heck!

Legislators in those countries have capped the rates, especially for nonprofits, while those in the US and Canada have opened their hands out for campaign donations and turned a blind eye, allowing the companies to charge as much as they can get away with, or, in their words, as much as the “market will bear.”  For nonprofits, that means if you have to use those systems to collect donations, what choice do you have?  In the US at least, none, since the chance that Congress in this administration would do anything to lend a hand to nonprofits is nil.

Direct bank transfers through the Federal Reserve’s ACH or Automatic Clearing House system are the best.  We began using this system initially through banks in Arizona which were the first state to have all financial institutions enrolled in the system decades ago.  Later we used local banks in New Orleans to centralize the whole system, although setting the system up now via Capital One has been time-consuming, surprisingly difficult, and curiously still not resolved.

My correspondent is a big fan of ACH transfers and recommends that any nonprofit’s donation form access donations directly online via their supporters’ bank accounts through ACH.  He even notes that “companies like Stripe charge 0.8% on ACH” and “cap the total fee at $5.”  The downside is that Stripe requires “double verification,” meaning that they don’t honor the member’s signed authorization as submitted, but independently to back for another verification from the member.  Luckily, on ACH, a nonprofit doesn’t need Stripe at all, because with the member’s banking details, they can upload batches to the ACH system of most banks, and trigger the deductions and transfers to your accounts.

Still, none of this explains why banks are allowed to be such fierce gatekeepers of a publicly created system like the Fed’s ACH?  There’s even less to explain why our elected representatives think part of their job is fleecing small businesses and nonprofits in order to fatten the pockets of the middlemen who did nothing to create the value for either the organization or the individual member, but just stood in the door to pocket their vig, like gangsters and loan sharks.