Consumers have seen a recent and vexing trend of additional credit card charges at restaurants and stores. And, business owners are understandably confused when it comes to whether they can charge a credit card fee and how to notify consumers about such fees.
A new consumer protection law (NYS GBS § 518) went into effect on February 11, 2024 to address this credit card surcharge phenomenon. This new law amends and clarifies New York's existing credit card surcharge law and aims to provide greater transparency and protections for consumers.
The new law mandates businesses to post the total cost of goods or services with a credit card, including surcharges, before customers checkout. Proprietors can either display the total price inclusive of the credit card surcharge, or list separate prices for paying with a credit card versus cash. Further, the law requires the surcharge to be the exact amount charged by credit card companies or processors. The law only applies to credit cards, not to debit cards.
A civil penalty of up to $500 may be imposed for each transaction that does not comply with the law. Local governments have the ability to enforce this law and consumers can file complaints with the Division of Consumer Protection for a refund of any excess fees paid to a merchant.
The Division of Consumer Protection has provided some helpful guidance about what is allowed and not allowed under this new law which we have summarized below and can be accessed at CONSUMER ALERT: NYS DIVISION OF CONSUMER PROTECTION ALERTS.
Allowed
- Do display cash and credit card prices next to each other, noting which is which.
- Do list the total credit card price and note there is a “discount” for cash payments.
- Do charge the same price for cash or credit card payment.
Not Allowed
- Do not charge more than the actual amount of the credit card processing fee.
- Do not apply a blanket percentage fee to all credit card sales.
- Do not use a euphemism for a credit card fee (e.g., “convenience fees,” “service fees,” or “processing fee”).
- Do not charge a separate line item on a receipt for a credit card charge.
- Do not post a sign notifying consumers that there will be an additional fee for using a credit card (e.g., credit card processing fees apply or additional service fee for customers paying by credit card).
What Businesses Need to Know
With penalties for each violation of the law, non-compliance can become quite costly for business owners. Businesses should immediately review all signs, price tags, and receipts to ensure that they comply with the credit card surcharge requirements and revise, if necessary. Businesses should also review any surcharges currently applied to credit cards to ensure the amount charged is no greater than the actual fee charged to the company by the credit card processing company.
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