Merchants in New York now face a choice: full disclosure of credit card surcharges or eliminating those fees altogether, following a new law that took effect over the weekend. Retailers who choose to pass the surcharge to customers must relay the exact amount charged by credit card companies.
The law requires that businesses post the total cost of goods or services, inclusive of surcharges, before checkout. Proprietors can either display the total price or list separate prices for credit card and cash payments. Gas stations with separate prices for cash and credit must display both the higher credit price as well as the cash price. The penalty for not complying is up to $500 per violation.
Businesses are not permitted to present the surcharge as a discount on cash purchases, which would not apply to credit card transactions. They also can’t put a sign up that says a fee is applied to all credit card sales, or put a surcharge warning on the price tag. The fee must be spelled out. In addition, the surcharges for credit card payments cannot exceed the fees imposed by the issuer. The law does not apply to debit cards, since Dodd-Frank banned surcharges on debit cards.
The Fallout for New York Retailers
Although it’s not entirely clear, the law appears to apply only to New York businesses and not to out-of-state businesses, such as websites selling items to New York residents. Therefore, the law has the potential to handicap in-state retailers, who will have to disclose a higher price for credit card purchases, while retailers in other states are under no such requirement.
Indeed, internet retailers based in New York appear to be required to prominently disclose their credit card surcharges. That could put them at a competitive disadvantage, or they may go to the trouble of having two different landing pages for customers from different states.
Some states, such as Massachusetts and Connecticut, have responded to these pressures by banning credit card surcharges altogether. Given that every transaction under the new law has the potential to incur a fine, many New York merchants may find it easier to simply eliminate their own surcharges.
