Category: Article

The number of surcharge fees for credit purchases is increasing in the U.S. As a merchant, it is important to stay informed about the changes and news surrounding the relevant payment card networks. 

An important case to know about is Expressions Hair Design v. Schneiderman. The company, located in upstate New York, surcharged its customer a rate of 2.75 to 3.5 per cent. Expressions Hair Design’s owner, Linda Fiacco, stated that the justification for the charge was that it covered the transaction fees associated with credit card processing.

The U.S has a history of no-surcharges when it comes to credit card purchases. Between 1971 to 1984, the federal law barred these charges, and after the law expired, states such as California put into place their own no-surcharge laws. It was in 2014 when a group of retailers went against California’s attorney general. 

Notably, the argument against the prohibition of surcharges was that it restricted free speech rights under the First Amendment. It was argued that the preference to have surcharges as opposed to discounts was justified, as the choice affected customer reactions. However, the district court ruled that the California statute regulated speech and not conduct, which ultimately resulted in the case being struck down. 

Despite this, it was the Expressions Hair Design v. Schneiderman case that began to undermine the no-surcharge laws, particularly in New York. In March 2017, the Supreme Court ruled in Expressions Hair Design’s favour with respect to how the law contradicted with the merchant’s free speech rights.

In the court’s decision documents, Chief Justice John Roberts wrote that the surcharge law “is not like a typical price regulation.” He added that “What the law does regulate is how sellers may communicate their prices.”

With the ruling in place, merchants could charge $10 in cash and a credit price of $10.30, for example. However, merchants cannot charge $10 in addition to a three per cent surcharge for the use of a card. Roberts noted that the law regulates speech, as the monetary amount works out to be the same. In the case of California, the law was ruled as unconstitutional in the courts with regards to the Italian Colors Restaurant et al. v. Harris case as well. 

As of now, there are 11 states that have laws in place to prohibit merchants from surcharging credit card users. These states, in addition to New York and California, include Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma, and Texas.

In the case of Minnesota, the state prohibits sellers of goods and services who are responsible for customer credit cards from surcharging customers who wish to use a credit card as opposed to cash, cheque, or other methods of payment. 

As for the states that allow merchants to give their customers discounts and thereby encourage methods of payment that are not debit or credit cards, there are 10 that are applicable. These states include California, Colorado, Connecticut, Maryland, Massachusetts, Nevada, Oklahoma, Washington, Wisconsin and Wyoming, as well as Puerto Rico.

As a merchant, it is important to be aware of your respective state’s policies when it comes to surcharges, fees, and credit card interest. Contacting an attorney, your state attorney general, or an expert at PayFrame would be a step in the right direction if you have any questions or concerns. 

An expert at PayFrame may be contacted via email at info@payframe.com or phone at 1-888-668-0733.

As the technological world continues to advance at a breakneck pace, merchants should be up to speed when it comes to Strong Customer Authentication (SCA). 

Championed by the European Commission’s Revised Directive on Payment Services, SCA is integral to good business practices. It not only helps facilitate competition and efficiency within a business, but innovation as well, which is the driving force behind success. 

Consumers who are subjected to SCA, for instance, feel more secure when making online purchases, thereby driving more traffic and positively affecting the bottom line. 

In addition, payment services and providers within the financial technology market, for example, benefit from SCA by virtue of ensuring retailers that monetary amounts are on their way. As for account information service providers and aggregators, strong authentication allows customers to have overviews of their accounts and balances, which builds transparency and trust. 

When it comes to the objectives of the Regulatory Technical Standard, SCA is just as important. The main objectives, which are backed by the European Commission’s Revised Directive on Payment Services, are twofold. The first objective is to ensure consumer protection. Conversely, the other objective is to both level the playing field and encourage competition in a rapidly evolving market. 

SCA helps define the standards of how these objectives are fulfilled as well. For instance, consumer protection can be achieved via innovative and secure electronic payment methods that meet SCA requirements. These requirements include, but are not limited to a user’s ability to provide passwords and PIN numbers, a mobile phone number or a card, and biometrics such as an iris scan or a fingerprint. 

Throughout the European Union, SCA is already commonplace at various locations. When a customer pays with either a credit or debit card at a store in-person, for example, they must authenticate the transaction with a PIN number. 

It should be noted, however, that for remote electronic transactions involving monetary sums, SCA has only been applied to some countries. At the time of writing this post, these countries include the Netherlands, Belgium, and Sweden. As for other countries, they have service providers apply SCA on a voluntary basis. 

The infrastructure for SCA have to be set up by payment service providers and banks as well. This is in addition to improving on fraud prevention practices. Therefore, both their consumers and merchants should be well-informed and trained on SCA in order to fully take advantage of what it upholds. 

In the case of online payments, security should be enhanced through various methods such as one-time passwords and verification links. The reasoning behind this is to prevent hacking and fraud. Belgium, in particular, has applied such security measures and has seen a reduction in online fraudulent activity. 

With a plethora of credit card processor options out there that aid in SCA, one cannot be certain that they are always getting the best rates. At PayFrame, however, we are dedicated to helping your business succeed in a constantly evolving marketplace. Working with our team will guarantee the highest quality of service available, as well as our full commitment to help you reach your business goals. 

To contact the PayFrame team, email info@payframe.com or call 1-888-668-0733.

Before merchants can begin to surcharge for credit card purchases, they must first consider the requirements that a payment card networks have in place. 

For instance, should they wish to apply a surcharge, they must first identify the stakeholders. What would customers think? What are the top competitors doing? How would a business be disclosing surcharges to its customers? 

In addition to asking oneself these questions, it is also important to look into one’s specific state, in the U.S., and its statutes, laws, and policies. At the time of writing this post, the states that have laws in place which prohibit surcharging credit card users include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. To ensure that surcharging is permitted in one’s respective state, one can contact their attorney or an expert here at PayFrame

The next logical step when it comes to best practices for merchants would be to know when they can begin surcharging. In the case with Visa, merchants must notify the payment card network, as well as the acquirer, 30 days before surcharging customers.

As for when one can surcharge, this only pertains to credit transactions for the U.S. and its territories. Meanwhile, for Visa, debit and prepaid payment methods cannot be surcharged.  

It is important to note that a surcharge cannot exceed the cost of acceptance for the credit card. In addition, when it comes to disclosing surcharges to customers, proper signage, as well as notification, are required at the point of entry and the point of sale. Finally, the itemization of the amount surcharged must also be clearly identified on the receipt at the end of the transaction. 

Mastercard’s policy on customer notification and disclosure is similar to that of Visa. For Mastercard, merchants must provide a clear disclosure about surcharges to their customers. This disclosure should occur right at the point of interacting with customers. Customers should also be notified of the surcharge dollar amount via the receipt. 

Another important requirement to take into consideration for Mastercard is the specific rules of other accepted brands of payment card networks such as PayPal, American Express, and Discover. 

For instance, merchants can surcharge Mastercard cardholders depending on the cost of the aforementioned brands and the surcharging restrictions associated with them. Merchants should always look into the specifics for each of the brands they work with by contacting their acquirers. 

In terms of a merchant’s ability to surcharge with Mastercard, it is based on whether the merchant can satisfy particular disclosure requirements. For instance, one of these requirements is to notify both Mastercard and one’s acquirer of the intention to surcharge. This should be done in no less than 30 days before the surcharge gets implemented into the merchant’s system. 

Specifically, for Mastercard, one should have information regarding the merchant’s name, merchant contact information, type of channel, as well as the type of surcharge in order to fulfill the aforementioned requirements. In addition, one should have the number of surcharging locations, the date at which the surcharge would begin, and the merchant’s address ready at hand. 

The types of surcharges allowed for Mastercard include product-level and brand-level. While product-level surcharges let merchants impose the fee on particular Mastercard credit products, the latter option allows for merchants to charge the same percentage for all Mastercard credit cards.   

Of course, in both cases, there is a limit on the surcharge fee. This amount is dependent on the merchant’s cost for the payment card network’s credit acceptance. For a product-level surcharge, it must not exceed the merchant’s cost to accept a particular product of Mastercard. Conversely, for a brand-level surcharge, the amount should be less than that of the merchant’s average effective discount rate. This rate is what the merchant pays their acquirer for Mastercard credit acceptance. 
It is integral for any merchant to pay close attention to the payment card networks with which they work. The PayFrame team would be more than happy to provide advice and help business owners on this front. One can contact a PayFrame expert at either 1-888-668-0733 or info@payframe.com