Merchant Surcharging on Credit Cards Quietly Began on Jan. 27

Last weekend, while most people in the Northwest were riveted by the Portland Trail Blazers’ road loss to the Los Angeles Clippers, a relatively unheard-of rule took effect—one with implications for financial institutions, card issuers, businesses and consumers alike.

As of Sunday, Jan. 27, merchants in the United States and U.S. Territories can now impose transaction surcharges on consumers who use a credit card.

The new ability to collect the surcharge stems from an antitrust class-action settlement from July 2012 between VISA and MasterCard and a large group of merchants. The suit originated in 2005 when a group of roughly 7 million merchants charged the card companies and a number of card-issuing banks, including JPMorgan Chase, Bank of America, Citibank, Wells Fargo and Capital One, with fixing prices and unfairly increasing interchange fees on debit and credit card transactions.

In addition to the ability to impose an additional charge for credit card transactions, the merchants in the case received $6.05 billion to account for past damages.

Not all merchants will necessarily choose to assess the surcharge, but the change affects all financial institutions. Credit unions should be aware that:

  • Members will pay an additional fee when they use their credit cards at retailers that have decided to surcharge;
  • There are limits to the amount that retailers may surcharge based on either the brand or the product and the actual costs to the merchant;
  • Retailers are only permitted to assess the surcharge on VISA and MasterCard credit card purchases. The surcharge will not apply to debit cards, prepaid cards or American Express;
  • If the retailer intends to surcharge on credit card purchases, they must post notices at the store entrance and at the point-of-sale terminal;
  • The surcharge fee must be disclosed on every receipt; and
  • Retailers can continue to offer discounts for other forms of payment, such as cash, checks or PIN-based debit transactions.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Business Solutions, Compliance, Industry Insight, Strategic Link.