WASHINGTON (2/4/13)--Eight states are introducing or considering state legislation that would bar merchants from charging consumers "check out" fees or surcharges on credit card transactions. The surcharges are allowed by an antitrust class action settlement between Visa and MasterCard and a group of merchants.
The Credit Union National Association and the state leagues are monitoring these proposals to see how the rules would impact credit unions.
If the measures pass, the states would join 10 other states already exempt from the $7.2 billion July settlement's provision that, as of Jan. 27, allows merchants in the U.S. and U.S. territories to impose transaction surcharges of between 1.5% and 4% of the cost of the purchase on consumers who use a credit card. (The checkout fee must be equal to what the merchant pays to accept the card, which is typically 1.5% to 3% in the U.S.--not to exceed 4%.)
Bills have been introduced in Hawaii, Illinois, Mississippi, New Jersey and Rhode Island. Legislators in two other states, Pennsylvania and West Virginia, say they are drafting a bill, and there is interest in Vermont as well.
For example, in New Jersey, S-2533, sponsored by Democratic Sens. Jim Whelan, Bob Gordon and Nia H. Gill, would prohibit retailers from imposing a surcharge on those paying with a credit card. Retailers who do so would be subjected to penalties up to $10,000 for the first offense and up to $2,000 for each subsequent offense. Calling the surcharges "an undue burden on New Jersey families," Whelan noted that nearly one-fourth of all purchases are made with credit cards and a surcharge could "negatively affect New Jersey's growing consumer confidence" (BankCreditNews.com Feb. 1 and PolitickerNJ.com Jan. 30).
Last week saw a spike in national media reporting on the surcharges, which garnered negative attention from consumers on social media sites and comments to news stories.
Although not all merchants will choose to surcharge, the change affects credit union members and all other consumers using credit cards and could impact financial institutions as a result. The surcharge applies to Visa and MasterCard credit cards only. Debit, prepaid cards and other company cards such as American Express are not included in the agreement.
The settlement is being opposed in court by other groups of merchants. (See related story in today's News Now, "Appeals court won't review antitrust deal until final lower court decision.")
The original 10 states with laws already on the books outlawing surcharges are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.