These days, it seems like everyone pays with a card. Whether it’s the trusty physical Visa in the wallet or a digital tap-to-pay method like ApplePay, use of cards in the US has risen to an all-time high. An estimated 36 percent of purchases are now made using a credit card and, as Hudson Valley business owners know all too well, accepting credit cards also means dealing with the transaction fees that can eat into their bottom lines. As of last month, merchants in New York have a new set of rules they have to follow when it comes to how they handle and disclose those fees.
“Most credit card companies charge merchants a processing fee for accepting their credit card as a form of payment. These fees can range anywhere from 1 to 3.5 percent. In turn merchants in many states including New York were passing those fees on to the consumer in the form of a surcharge,” says Elisha L. Rapp, an associate attorney at Walden-based J&G Law who concentrates in business law. “Unlike the unmistakable two-tiered pricing we commonly see at the gas station—one price for credit and another for cash/debit—most merchants weren’t informing the consumer of the difference in price until they were already at the cash register. Moreover, not all merchants were charging the consumer what the credit card companies were charging them.”
The new law, which was signed by Governor Kathy Hochul in December and took effect last month, aims to rectify these issues by requiring businesses to clearly post the cost of purchasing items with a credit card, and prevents businesses from imposing more in credit card surcharges than what they are charged by processing companies.
“The amended statute requires merchants to now make the difference in price between cash and credit readily known by requiring merchants to clearly and obviously post the highest price the consumer will have to pay if they choose to use a credit card,” says Rapp. That means merchants will need to post signage declaring any difference in price by using a credit card before they get to checkout.
Adding a sign at the register may seem simple enough, but according to Rapp, businesses must also follow a specific format for declaring any price increase. “A merchant will not be considered compliant with the law if they simply post the percentage fee that would be added to the price (i.e. If you use a credit card you will incur a 3% fee). Instead, the merchant must do the math for the consumer and post the actual price with the percentage fee included (i.e. cash price $100, credit card price $103, price includes a 3% surcharge),” she says.
The new regulation also puts a cap on how large of a fee a business can charge for the use of credit cards. “If the merchant decides to add a surcharge fee, a merchant can only charge an additional fee up to the value of what the credit card company is charging the merchant for processing the transaction and nothing more,” she says.
“Failure to comply with the new surcharge disclosure requirements could result in a civil penalty of $500 per violation,” says Rapp. “This may be enforced concurrently by the director or commissioner of a municipal consumer affairs office, or by a town attorney, city corporation counsel, or other lawful designee of a municipality or local government.”
“Ultimately, the hope is that the new law will alleviate the complaints from consumers from across the state regarding the number of restaurants, retail stores, service providers, medical professionals, and other business entities charging a surcharge without informing the consumer of the difference in price before they reach the point of sale,” she says.
As New York Assemblymember Amy Paulin said after the legislation was passed, “The legislation is about transparency, fairness, and preventing consumers from being misled when making purchases using credit cards.”
For additional information and examples of compliant disclosures, visit the New York Department of State Division of Consumer Protection website.
To learn more about the law firm of J&G Law, visit Jglaw.law.
