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Merchants CAN Surcharge for Credit Cards

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July 25, 2012 by   - () Leave a Comment

Art Lieberman

Editor's Note: The following article appears in the CalARVC News and was written by Art Lieberman. Lieberman is president of MCPS for Campgrounds, a dedicated processor for the RV campground industry. He can be contacted by phone at (877) 858-9010 or by e-mail at rvcreditcards@yahoo.com.

In a lawsuit settled over the past weekend in the U.S. District Court in my old hometown of Brooklyn, the credit card industry has been changed forever and there will be a dramatic impact on the bottom line of all campground owners who accept credit cards as a form of payment.

In a case that has been in court since 2005, 50 plaintiffs including Kroger Co., Payless ShoeSource and Safeway, Visa and MasterCard were being sued for NOT permitting retailers to surcharge for credit card transactions. These 50 cases were consolidated into one suit that was scheduled for a September trial date this year. Several large banks were also named in the law suit also, such as Bank of America, J.P. Morgan Chase, Citigroup and Wells Fargo.

However discussions that took place between the plaintiffs and the credit card companies over the past year ended in a settlement late last week. Retailers have long desired to charge customers who pay with plastic rather than cash. These charges would defray the transaction costs to retailers which, of course, increases the costs of goods and services since these charges are passed on to consumers. But Visa and MasterCard had banned the practice and part of their rules required that retailers follow those rules or lose the card services altogether. It was permitted to discount prices for cash, but they may not ADD charges for credit card transactions.

But this changed late last week.

Spokespersons for Visa and MasterCard had declined to comment on the pre-trial discussions but Bloomberg News reported last week that a settlement could be reached before the end of July. A change in the surcharge rules would NOT affect purchases from Discover or American Express.

The lawsuit contended that the card companies engaged in anticompetitive behavior by conspiring over fees, known as Interchange (see our many articles on the subject) that merchants pay every time a credit card transaction takes place. Last year part of the Dodd-Frank financial overhaul law known as the Durbin Amendment, cut in half debit card transaction fees, but left intact credit card swipe fees.

The settlement contains three components: The plaintiffs will be paid $6 Billion by the defendant card companies and the banks that were sued. The two credit card companies will temporarily reduce the interchange fees charged to merchants and, finally, and most importantly, the companies will eliminate the no-surcharge rule which forbids retailers to charge more for a credit card transaction.

Why were the settlement offers accepted by the giants of the credit card industry? Probably because, had they lost the case, they might have to pay treble damages. They may also lose credit card volume which impacts severely on their bottom line.

There are some caveats for consumers however because of the settlement agreement:

  • Merchants may not be permitted to charge consumers more than they are charged by their credit card companies.
  • Merchants may only be permitted to charge for credit card transaction NOT for debit cards, which means every transaction must be examined to determine which type of card is being used.
  • Merchants must post a clear statement of what the surcharges are, both in signage in their facility and online.
  • Merchants must denote the exact amount of the surcharge at the time of the transaction.

Last year we informed our readers that campground owners COULD post a sign legally in their stores which stated that they would NOT accept credit card transactions under $20 and that customer’s signatures were no longer necessary on smaller purchases under $25. The latter rule effectively eliminated chargebacks for smaller purchases whether in a campground store or restaurant.

Stay tuned for further clarification of the results of this landmark settlement.

 

 

 

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