Ed Meng just wanted to go home. It was late last Sunday night and Meng needed to get out of Potero Hill and back to his bedroom, stat. He didn’t have any cash on him but he hailed a cab anyway, assuming he could use his credit card. He figured paying with his card was a safe bet because most San Francisco cab companies have willingly accepted plastic for years. Besides, thanks to a new SFMTA rule, all cabs operating in the city are now required to accept cards.

Things did not work out precisely how Meng had envisioned.

“When [the driver] picked me up, I said I need to pay with a credit card, and she immediately said, sorry the machine is not working,” Meng recounted to the Appeal.

“I had no cash on me, so I asked if she had the swipey manual card thing they use to make carbon copies…and she flips out on me, starts screaming at me, so I got concerned and started filming it.”

Meng’s video reveals a tense situation. The driver won’t accept Meng’s card even though signage on the cab clearly states the contrary. She tries to kick Meng out of her cab, but he stands his ground asking for her name and her cab identification number. Eventually Meng gets a name and ID number, hops out of the cab and quickly hails another one who was more than happy to accept his card.

Stories of cab drivers feigning broken credit card scanners or just refusing to take cards have abounded in the months after SFMTA imposed a 5% processing fee on all credit card transactions.

Credit card usage in cabs has been on the rise in recent years and currently accounts for one third of all fare payments. Some in the industry, such as Yellow Cab General Manager Jim Gillespie, speculate cards could be used to pay for up to half of all trips within a decade.

In a business with margins as razor-thin as cab driving, some are opting to take the chance of losing a passenger’s fare entirely in the hopes of forcing them to pay cash. With cash, not only do drivers get to keep all of what they earn, but those earnings could be entirely tax free if they simply “forget” to report them, some say.

A little over a decade ago, when Gavin Newsom was just a humble supervisor and the lieutenant governorship was merely a gleam in his hair gel, the future Mayor pushed a piece of legislation though the Board of Supervisors that fundamentally changed the relationship between cab drivers and taxi companies in the way credit cards are handled.

Previously, the cab companies processed credit cards themselves and charged the drivers a nominal fee for the service. This system is virtually identical to those in most other major American cities. Newsom’s law precluded cab companies from skimming a few percentage points off the top of each transaction and required them to eat the processing cost.

Naturally, this didn’t sit well with the city’s handful of taxi companies, who similarly claim razor-thin profit margins, and they’ve spent the intervening years leaning first on the Taxicab Commission and then on SFMTA, after the regulation of cabs was folded under SFMTA’s wing, to revert back to the old system.

Earlier this year, SFMTA finally caved and changed the rules and allowing the cab companies to push the processing fees back onto drivers–albeit with some conditions. SFMTA set a standard rate of 5% and dictated that the cab companies could no longer handle the processing in-house.

Even so, the wall of separation between the cab companies and their third-party processors isn’t all that thick. The external processor used by Yellow Cab, for example, contracts their customer service operations back to Yellow Cab.

The agency mandated that a portion of these fees go to the installation of credit card terminals in the backseat of every cab in the city. There are essentially two reasons for these terminals. The first is an added level of safety.

“The machines provide added security because customers do not have to hand their credit card to the driver,” says SFMTA spokesman Paul Rose. “They provide additional convenience to our customers to ensure that they can more easily pay with a credit card.”

Reticence about handing one’s credit card to a complete stranger is understandable, but that’s only half the reason behind the terminals. If you’ve been in a New York City taxicab in the past few years, you’ve probably noticed their terminals blaring ridiculously easy trivia questions (“the answer is New York City”) and barraging you with ads for the hot new Broadway show when all you really want to do is hold your head in your hands and contemplate how it was even possible to spend $50 on just three drinks.

Well, get ready for more of that because those backseat ads are coming to San Francisco. When installed, the backseat terminals will play similar ads, as well as public service announcements and general information about San Francisco.

In his blog Taxi Town SF, cab driver John Han argues that the majority of the proceeds from the ads will flow directly into the coffers of the credit card service providers. Even though 10% of the revenue is earmarked for the Drivers’ Fund, that number is in excess of the dollars required for equipment’s maintenance and installation. Han is skeptical that the terminals will end up as a net positive for drivers–a belief that’s fairly widespread within the community.

Largely due to the issues like the credit card fees, many taxi drivers (usually a fractious bunch) have started getting organized. People like former-District 6 supervisor candidate and taxi driver advocate Dean Clark, have been urging drivers to work together to push their agenda. This growing organization exploded out into the open when a horde of irate cabbies flooded an SFMTA board meeting with a laundry list of complaints–not the least of which were concerning the credit card fee.

This time, bowing to driver pressure, SFMTA proposed the first hike in cab fare rates in 8 years. The agency’s proposal will increase the mileage fare to $0.55 for every 1/5 of a mile driven and $0.55 for each minute spent sitting in traffic–this is an increase of $0.10 in each case. The “flag drop rate,” the base amount a cab charges at the beginning of each ride, will similarly see a $0.40 increase to $3.50.”

Gillespie predicts this rate increase will go a long way in quelling cabbie discontent. “On average, I’m calculating that drivers will make an extra $48 per shift under the new rate structure and, due to the new credit card fare, they’ll only lose about $8,” he says. “The math works out in their favor.”

Clark, on the other hand, isn’t so sure. “This fare hike won’t do much to calm down the drivers,” he says.

“Their issues run deeper than just low pay. Drivers don’t get health insurance, there’s no workman’s comp if they get injured and companies aren’t even required to make sure the airbags in the cars work.”

Even if cabbies are privately grumbling about the new fee, the vast majority still readily accept them. Gillespie says he only gets one or two complaints a day from passengers on credit card issues–a number he considers minimal because, on any given day, Yellow Cab can have up to 1,300 drivers on the road.

Not only that, but Gillespie attests that, “the overall volume of credit card transactions have gone up in the month since the credit card fee was enacted.”

What’s the take away here? If you get in a cab and the driver says his or her credit card scanner is broken, are they lying to you? Very likely.

Will the next cab you get in gladly accept your Visa card? Even more so.

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