Visa/MasterCard Interchange Fee Litigation – Credit Card Surcharge

01 May Visa/MasterCard Interchange Fee Litigation – Credit Card Surcharge

You might have heard about a lawsuit against Visa and MasterCard for over-charging Interchange fees and a settlement amount of 6.05 billion dollars, but are unclear on how it will affect you as a merchant.  You might have also heard that you will be able to surcharge for credit card charges made by your customers.

Here’s the official website for the settlement which gives a lot of information on the subject:

http://www.paymentcardsettlement.com

The main take-away points around this litigation are as follows:

– If you are a merchant who has accepted credit card payments at any time since 2004, you are a member of the class action suit.  If you wish to withdraw from the suit (if you have plans to bring suit against Visa/MC independently) you must do so by May 28^th, 2013.

– Effective January 27, 2013, merchants are able to surcharge a customer’s credit card transaction where permitted by local and state laws.

– If you wish to surcharge for the use of credit cards, you must register with Visa and MasterCard:

http://www.visa.com/merchantsurcharging

http://www.mastercard.us/merchants/support/surcharge-rules.html

You cannot simply tack on an additional fee for those transactions where someone pays with a credit card.  Additionally, your equipment will need to be re-programmed to account for this surcharging – they are not making it easy to implement the surcharge.

– If you do surcharge, you cannot do so for either debit cards or pre-paid credit cards.  This is too bad, as it would have been a huge help to small-ticket establishments that are hurt by the Durbin amendment where the Interchange rate is .05%, but the transaction fee is $.22.  The $.22 cuts into profit quickly when someone pays for a $2 cup of coffee with a credit card.

– You cannot implement a surcharge fee in the following states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.  All of these states have legislations that prohibit surcharging regardless of the changes made as part of the settlement.

Be on the lookout!
Merchants may be approached or notified by various businesses offering to immediately purchase or seek assignment of the merchant’s claim against the proposed settlement fund. As you all likely know, the merchant service industry is largely unregulated and agents of various processors and independent sales organizations will say nearly anything to get your business.  Merchants are encouraged to consult with their own financial, accounting, or legal advisors regarding their decision to sell or assign any potential claim against the proposed settlement fund instead of waiting for the court administered claims process and the accompanying payments resulting from same.

AdvoCharge will continue to monitor the situation and report to you on any updates.  If you have any questions, please feel free to contact us.