A New York law aimed at protecting consumers against hidden credit card surcharges went into effect on February 11, 2024. The new credit card surcharge law restricts the methods that businesses can use to mitigate the impact of transaction fees incurred in credit card transactions.
By now, many of us have spotted a sign touting a policy such as "1.5% fee added for credit card purchases" near the cash register. The new credit card surcharge law would prohibit this particular practice. However, as more consumers turn to non-cash payment methods, there are ways that businesses can respond to credit card transaction fees while also complying with the new law and protecting consumers from surprise charges.
The New York Department of State's Division of Consumer Protection has issued some practical guidance on approaches that would comply with the new credit card surcharge law. Consider the following approaches:
1. Display the higher credit card price and offer a discount for cash purchases.
2. Display both the higher credit card price and the lower cash price.
Businesses are also cautioned against certain noncompliant practices. Business owners may not impose a percentage surcharge for credit card purchases.
An aggrieved consumer has no direct recourse against a business owner since the credit card surcharge law does not provide a private cause of action, but the consumer can report violations to local government officials or to a local consumer protection agency. Officials may enforce the guidelines by initiating an enforcement action against noncompliant businesses. Violations carry a civil penalty of $500. Conceivably, a serious offender could be on the hook for $500 for each noncompliant surcharge, so businesses should take care to make sure their practices fall within the safe harbors outlined by the Division of Consumer Protection.
In a nutshell, a business can still take steps to obtain relief from the impact of fees associated with credit cards as long as they do so within guidelines established to protect consumers against hidden and surprise fees.
Information for this blog was provided by Rosa Alina Pizzi, Partner, and Jeremy Amar-Dolan, Senior Associate, at Phillips Lytle LLP. They can be reached at rpizzi@phillipslytle.com or jamar-dolan@phillipslytle.com.
