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18 States Considering Bans on Credit Card Surcharges

Eighteen states are now considering legislation that would bar retailers from imposing surcharges when consumers use their credit cards.

The state-level proposals come in the wake of new rules that allow would merchants - for the first time ever - to impose surcharges on MasterCard (MA) and Visa (NYSE:V) purchases that could help them recoup the swipe fees they pay to the card networks.

Prior to the rule change, 10 states had already imposed bans on credit card surcharges, which limited the potential impact of the new rules.

Proposals to outlaw the fees are pending Arkansas, Hawaii, Illinois, Indiana, Kentucky, Maryland, Michigan, Missouri, Nevada, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont and West Virginia. (American Banker previously reported that nine states were considering surcharge bans.)

Few, if any, merchants have yet to add surcharges to card transactions because most fear that doing so would spark a customer backlash, sending business to their competitors. Indeed, the proposals to ban surcharging are being touted by their backers as consumer-protection measures.

Still, merchants fiercely oppose the bills because, if passed, their options for recovering income lost to interchange would be limited.

"This is simply a way to hide the fact that Visa and MasterCard charge exorbitantly high prices," David Vite, president of the Illinois Retail Merchants Association, told American Banker in February. "We think it's unnecessary. We think it's an overreach."

Banning surcharging would also remove a key bit of leverage banks would have in price negotiations with the two card networks.

Of the 18 states that are now considering legislation to ban surcharging, the issue has progressed furthest in Utah, where a bill has been sent to Republican Gov. Gary Herbert. The bill is currently under review by the governor's office, according to a spokesman.

In New Jersey, a bill has passed the state Senate, but the state Assembly has yet to vote on the measure.

One state not on the list, Mississippi, enacted a very limited ban on credit card surcharges last week. The new law applies only to transactions made with credit cards issued by the state government.

And lawmakers in one state that was previously mulling a ban on credit-card surcharges, Washington, have opted not to.

The proposal in Washington state was amended merely to require that retailers provide notice to their customers when they impose surcharges. Such disclosures are already required under the MasterCard and Visa rules.

Meanwhile, legislation to relax an existing ban on credit card surcharges has been introduced in Maine, one of the 10 states that currently prohibit surcharging. The other nine states are California, Colorado, Connecticut, Florida, Kansas, Massachusetts, New York, Oklahoma and Texas.

The new MasterCard and Visa rules to allow credit card surcharges are part of the proposed settlement of a class-action lawsuit filed by merchants against the two card networks.

The settlement deal is being opposed by many large merchants and their trade groups, largely because it allows the two companies to continue setting credit card swipe fee prices.


(2) Comments



Comments (2)
This surcharge is exactly what credit card companies want: it kicks the door open to allow them to profiteer from yet more fees on use of plastic cards.
Merchants who think a surcharge can solve their problems to cover fees they pay for card use, are deluded if they believe this is only that.
This is bad for everyone, and bad for the economy.
The only ones it benefits, are the Credit Card Companies; companies that will keep jacking up their already egregiously high rates to harvest higher fees--the surcharge is simply a tool that allows them to gauge how much public is willing to keep shelling out.
Posted by Chimonger | Tuesday, June 25 2013 at 1:51PM ET
In WA, This surcharge is being charged on DEBIT CARDS, not just credit cards. Limited % on amount of sale? not much.
==COSTCO just charged 10% on our Visa DEBIT card [all our accounts have Visa Debit cards attached to them], debited IMMEDIATELY from our account. It is highly suspect that Costco is yet again, trying to force their customers to subscribe to their American Express alliance.
==When vendors charge 10% of a sale, or the local gas station charged ten cents more per gallon of gas [already too high priced] for using debit card / credit card, or vendors charge welfare recipients already barely subsisting, on their food-stamp or other welfare debit cards, THIS surcharge is BAD business.
There is NO way to excuse or explain it to make it right, especially in our poor economy.
==Those who can least afford it, are paying most dearly.
==Those who can afford it does huge disservice to those larger numbers who cannot afford this.
==This surcharge is going to do further harm to our economy, and particularly to smaller vendors.
Posted by Chimonger | Sunday, June 02 2013 at 5:09PM ET
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