Colorado is the one exception to this rule. \tab Were not talking about mere pennies here. The surcharge that merchants pass on to consumers cannot exceed the cost merchants are charged by credit card payment processors. It is better for the consumer to have unsecured debt, meaning debt that has no collateral (an object that can be repossessed if the debt is not paid). Here we outline two ways a lawyer or law firm can pass the cost of processing on to the client, or at least share the cost with the client. [Filed 3/15/91, Notice 2/6/91published 4/3/91, effective 5/8/91] Surcharging is legal in most U.S. states but prohibited in some. The number and location of departmental sites that may accept credit card payments. a. \par Credit Card Surcharge Processing: What CPAs and Accountants Need to Yes, surcharging is allowed only on credit card transactions, it is prohibited on debit and prepaid card transactions. The amount varies depending on the card network as well as other factors. Eleven states have laws on the books that prohibit businesses from charging surcharges to customers who pay with credit cards. {\plain\f4\fs21\cf2\ulc2 Click here to register with MasterCard 30 days prior to surcharging: Click here to register with Visa 30 days prior to surcharging: Click here if you have a merchant account with Motus Financial; to register with Motus Financial just provide your name, merchant number and contact information 30 days prior to surcharging: You must provide clear disclosure to your customers that you are imposing a surcharge; including the amount and that the surcharge is not greater than your discount rate. Click here to register with MasterCard 30 days prior to surcharging: here. {\plain\f4\fs21\i\cf2\ulc2 } ALL RIGHTS RESERVED. \pard\intbl\li1800\sl250 You are allowed to surcharge equal to your average fees paid over the past quarter - up to 4%. \par \pard\qj\fi340\sl250 Insurers can pass certain payment costs onto policyholders. \red255\green255\blue0; {\plain\f4\fs21\cf2\ulc2 {\plain\f4\fs21\cf2 \pard\qj\sl250\tx340 Below we provide links to reference materials on states where surcharging is limited. 8.3(3) \pard\qj\sl250\tx340 The debt is unsecured because: 1) there are no purchased goods that the company can take back and 2) there are no goods that you agreed to give them if you did not pay. If your business is in NY, and the cardholder lives in Massachusetts or Connecticut, you are not allowed to surcharge. {\plain\f4\fs16\cf2 means the same as defined in Iowa Code section 537.1301, subsection 17. You must provide 30 days advance written notice to Motus Financial, Visa and MasterCard. If a state department is allowed to charge its customers a convenience fee under the credit card processing contract, then the following shall apply: When it comes to credit and debit card processing for lawyers and law firms, the fees can be expensive. and state statutes. ARE THERE ANY OTHER LAWS THAT LIMIT SURCHARGING? \pgnrestart\pgnstarts1\pgndec \tab } However, a recent court case in New York struck down its ban on credit card surcharges, permitting merchants to add these to your bill. {\plain\f4\fs21\cf2\ulc2 Robertson & Hellerstedt \cell means the same as defined in Iowa Code section 527.2 and includes any bank incorporated under the provisions of any state or federal law, any savings and loan association incorporated under the provisions of any state or federal law, any credit union organized under the provisions of any state or federal law, any corporation licensed as an industrial loan company under Iowa Code chapter 536A, and any affiliate of a bank, savings and loan association, credit union, or industrial loan company. NIFB opposed the aforementioned Visa-MasterCard settlement on behalf of our members, because the settlement offered too little compensation and was under-protective of small businesses. Is it Legal to Charge Customers a Credit Card Processing Fee? Debit card transactions that are processed on credit card association networks are typically called signature-based debit card transactions, while debit card transactions processed on electronic funds transfer networks are generally referred to as PIN-based transactions. \pard\qj\sl250\tx340 and state statutes. Credit card surcharge laws are anything but cut and dry. A state department shall be responsible for achieving and maintaining compliance with all applicable PCI-DSS. Interest rates and terms should be on credit card applications and on the back of monthly statements. \pard\keep\sl180 \par } Ads may also offer a lower rate for a short period of time. The card brands (Visa, Mastercard etc.) {\plain\f4\fs21\cf2 See below for details. \red0\green0\blue128; } 7818.4 WHAT ARE THE RULES FOR PRODUCT LEVEL SURCHARGES? {\plain\f4\fs21\b\cf2\ulc2 \tab If you are low-income and want advice about your credit problems, call Iowa Legal Aid at 1-800-532-1275. 8.4(8) {\footerl A state department shall follow the procedures and rules for charging a convenience fee for credit card and debit card transactions as outlined in the agreement between the financial institution, merchant services provider, and treasurer, and as specified in the merchant guidelines, and by the credit card associations rules. INTERESTED IN HELP SETTING UP A SURCHARGE? Yes, Visa and MasterCard require that merchants who decide to surcharge credit card transactions must satisfy the following notification and disclosure requirements: How to Register or Disclose a Surcharging Policy. This is sometimes called a surcharge or a convenience fee in many states. Weekly Briefs: Decision overturning skirts-only rule survives; 'Hurricane Carter' judge dies, Creating Space at the Table: Succeeding as a female in the still-male-dominated field of law, Attorney for Lawrence v. Texas reflects on LGBTQ rights on 20th anniversary. \pard\qj\fi340\sl250 {\plain\f4\fs21\cf2 Reproduction or republicationstrictly prohibited without prior written permission. Merchants in this state may either (1) surcharge a maximum of 2% or (2) charge the actual cost the company pays for credit processing. \pard\qj\fi340\sl250 \pard\qj\sl250\tx340 \pard\qj\fi340\sl250 {\plain\f4\fs21\cf2\ulc2 The NCUA provides a number of support services to the credit union system, such as providing training, grants and loans, chartering, and field-of-membership services; maintaining the health and stability of Share Insurance Fund; managing the assets of failed credit unions; and providing emergency liquidity. Credit Card Surcharge Guide For Merchants: 2023 Laws & Rules September 29, 2021 The practice of implementing a surcharge to recoup the costs of credit card processing fees was illegal across the country for several decades. There are separate regulations for government and educational agencies . } {\plain\f4\fs21\i\cf2\ulc2 } Charging any extra surcharge, convenience fee, or other extra cost also puts you at a disadvantage. Regardless of whether you can, the ultimate business decision to surcharge is yours, which leads me to. } } 337 Penco Road Can you pass on the costs to your customers? James G. Connolly, Esq. \par U.S. merchants won the right to start charging fees on credit card payments on Jan. 27, 2013. A Vendor's Evaluation of a Credit Card Payment Program Surcharge . \par \par i. } [Filed 7/11/96, Notice 6/5/96published 7/31/96, effective 9/4/96] } Credit card surcharges are optional fees added by a merchant when customers use a credit card to pay at checkout. In addition to the finance charge permitted by parts 2 and 4, a creditor may contract for and receive the following additional charges: a. IAC 9/22/10 } We are not aware of any such provisions, in either Chapter 536C or Chapter 537, other than those discussed. {\plain\f4\fs21\cf2\ulc2 \pard\qj\sl250\tx340 \pard\qc\sl250 \par {\plain\f4\fs21\cf2\ulc2 View Profile View . \par Adhere to state laws regarding surcharges and convenience fees. \par However, credit unemployment insurance shall be permitted under this paragraph if all of the following conditions have been met: (1) The insurance provides coverage beginning with the first day of unemployment. Chargeback\~ } {\plain\f4\fs21\b\cf2\ulc2 You are not allowed to surcharge cards for cardholders from states where surcharging is illegal. Business Law |Criminal Law |Outsourced General Counsel | Mediation |Immigration Law |Civil Rights Law |Litigation |Intellectual Property Law |Family Law |Bankruptcy Law |Elder Law | Estate and Probate. } Many lawyers assume that charging clients an additional fee for payment processing is unethical or at least slimy. This can make you go over the limit. \par {\plain\f4\fs21\b\cf2\ulc2 The surcharge must be the same for all transactions of that particular product (Visa Signature, World Elite MasterCard, etc. 2 California Civil Code 1748.1(a) 3 Tex. \tab The Iowa Department of Revenue does not receive or charge any fees for payments. {\plain\f4\fs21\cf2\ulc2 How to Choose the Best Credit Card Processing System for Your Business in Madison WI. Acquiring bank\~ {\plain\f4\fs21\i\cf2\ulc2 The settlement allows merchants to add a surcharge on credit cards only. \f1\fswiss\fcharset0 Helvetica; 7818.3 Can businesses charge you for using a credit card? } {\plain\f4\fs21\cf2\ulc2 The fact that each scenario above has the exact same economic result is the basis for the lawsuits challenging surcharge laws in several states. {\plain\f4\fs21\cf2\ulc2 For example, if you're buying an item for $100 and there's a 3% surcharge, you'll have to pay $103 if you pay with a credit card. An unsecured creditor will usually have to settle for receiving only a small percentage of the value of the unsecured debt. } By accepting the credit card, you agree to the terms. {\plain\f4\fs21\b\cf2\ulc2 {\plain\f4\fs21\cf2 \pard\sb210\qj\sl250 } 8.3(5) If a fee is added to credit card transactions, it doesnt matter that your processor calls it a cash discount - it is a surcharge. e. With respect to a debt secured by an interest in land, the following closing costs, provided they are bona fide, reasonable in amount, and not for the purpose of circumvention or evasion of this chapter: (1) Fees or premiums for title examination, abstract of title, title insurance, or similar purposes including surveys. } The Iowa Department of Revenue offers individuals and businesses the opportunity to pay certain taxes and fees by credit or debit card over the Internet or by telephone. By Claude Ducloux, Attorney at Law, LawPay Director of Education, Ethics, and State Compliance. Here are the basic rules of credit cards: Rule # 1. The treasurer shall enter into an agreement with a financial institution to provide credit card payment processing for state departments. You asked whether portions of Iowa Code Chapter 536C affecting interest rates and terms of repayment are preempted. Visa has also created a website that provides more information related to surcharging. {\plain\f4\fs21\i\cf2\ulc2 } \pard\qj\fi340\sl250 \cellx8640 \tab } Credit card processing fees can eat into your profits but what if you could use them to generate revenue instead? Prohibitions Under State Law. A security interest is a secured creditor'sright to take the goods if the debt is unpaid. {\plain\f4\fs21\cf2\ulc2 } \red0\green0\blue0; (3) Escrows for future payments of taxes, including assessments for improvements, insurance and water, sewer and land rents. 8.4(3) Meanwhile, some states explicitly authorize merchants to offer cash discounts to encourage customers to pay by methods other than credit cards (E.g., CA; CO; CT; MD; MA; NV; OK; WA; WI and WY). } At the end of the day we may either see a better settlement agreement, or this case may proceed to trial. ACCEPTING CREDIT CARD PAYMENTS You did not identify the law with which you are concerned. } Please check official sources. } \pard\qj\sl250\tx340 A state department shall follow the instructions provided by the treasurer for completing cash receipts documents to reflect credit card transactions that post to the treasurers account at the financial institution. However, accepting credit cards also means accepting financing charges or interchange fees commonly known as swipe fees. These swipe fees are usually between 1% and 4% of the underlying purchase (for example, between one and four dollars per one hundred dollars charged). The treasurer shall consult with the state department to assist in determining the amount by which the departments fees may be adjusted to reflect the cost of credit card processing. WHAT ARE THE RULES FOR BRAND LEVEL SURCHARGES? A surcharge cannot exceed 3%. {\plain\f4\fs21\i\cf2\ulc2 If you need to use credit to make a purchase, consider other options. This method, initiated by payment providers, lets insurers reduce costs and even generate additional income all while giving consumers the payment options they want. {\plain\f4\fs21\cf2\ulc2 {\plain\f4\fs21\b\cf2\ulc2 Retailers can also require a minimum purchase amount when you use credit cards. b. The good news is that, yes, passing payment processing costs onto policyholders can be done legally. } } \cell \cell {\plain\f4\fs21\cf2\ulc2 \pard\sb210\qj\sl250 } } \pard\qj\sl250\tx340\tx680 \tab (5) Fees or charges listed in section 535.8, subsection 4, paragraphs a and b. } This contract sets out the terms and interest rate that a credit card company has. {\plain\f4\fs21\b\cf2\ulc2 The customer gets to pick the option that makes them happy. Credit Card Surcharges: When Merchants Charge You Extra - The Balance \tab , IAB 9/22/10, effective 10/27/10] When you fill out a credit card application, you sign a written contract or make an oral contract over the phone. But they have to be a flat fee (say, $2 per transaction) rather than a percentage. Article 3, Part 3 of Chapter 537 imposes limitations on use of security for loans. {\plain\f4\fs21\cf2\ulc2 \red192\green192\blue192; } } {\plain\f4\fs21\i\cf2\ulc2 In the United States, credit card convenience fees are legal. } } Surcharging is the practice of adding a small fee to a credit card transaction to cover the merchant's costs for processing the payment. } Theres a better way. As used in this chapter: firms should be familiar with prior to implementing either surcharging and discounting: card brand rules, state laws and the state rules of professional conduct. \red255\green255\blue255; Rule # 1. For many small business owners, credit cards can be a blessing and a curse. According to ValuePenguin, average processing fees for Visa range from 1.43% to 2.4%, while average processing fees for American Express range from 2.5% to 3.5%. A lot of processors are aggressively promoting surcharging solutions because they make significantly higher profits than on normal credit card processing, while claiming to be saving you money. To avoid recalculating, many processors will set pretty steep flat rates of 4% on all cards. } \tab Watch our client stories. f. (1) With respect to open-end credit pursuant to a credit card issued by the creditor which entitles the cardholder to purchase or lease goods or services from at least one hundred persons not related to the card issuer, the parties may contract for an over-limit charge up to fifteen dollars if the balance of the account exceeds the credit limit established pursuant to the agreement. Let us help reduce the cost and improve the client experience associated with accepting payments. A surcharge is just a fee thats added to credit card purchases. {\plain\f4\fs21\cf2\ulc2 You can use the fee calculator to easily estimate your convenience fee. {\plain\f4\fs21\cf2\ulc2 With respect to open-end credit obtained pursuant to a credit card issued by the creditor which entitles the cardholder to purchase or lease goods or services from at least one hundred persons not related to the card issuer, the creditor may contract for and receive any charge lawfully contained in a prior agreement between the consumer and a prior creditor from whom the creditor currently issuing the credit card acquired the credit card account, if the account was acquired in an arms-length for-value sale from a nonrelated or nonaffiliated creditor. \par And in any event, the Visa-MasterCard litigation is not binding on American Express. The treasurer shall enter into an agency participation agreement with each state department authorized to accept credit card payments under the credit card processing contract. Rule # 5. Credit card terms are contracts and can be modified by mutual agreement. If the loan is not approved, the application fee shall not exceed the lesser of ten percent of the amount applied for by the applicant or thirty dollars. Users can find information on a single credit union or analyze broader nation-wide trends. Credit card transactions come with fees. However, if that section does apply to credit card transactions, it is preempted by Section 701.21(b)(1)(ii)(C) of the Regulations, which preempts any state law restricting use of balloon notes. {\plain\f4\fs16\cf2 {\plain\f4\fs21\b\cf2\ulc2 Following procedures issued by the treasurer to record receipts, corrections to receipts, refunds, chargebacks, expenses, and any other accounting transactions associated with accepting credit card and debit card payments. Many state legislatures, however, have objected to such fees for a variety of reasons. \pard\qj\sl250\tx340 \pard\keepn\sb57\qc\sl250 \tab } \tab Stay informed, subscribe to receive updates. Iowa Sales and Use Tax Guide - Iowa Department of Revenue \tab interest. \chpgn Ch If Iowa Legal Aid cannot help, look for an attorney on Find A Lawyer. A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice. 2001 - 2023 National Federation of Independent Business. \par This means the only way the company can get their money back is going to court and getting a judgment against you. {\plain\f4\fs21\cf2\ulc2 We assume that the statute about which you are inquiring is Iowa Code Chapter 536C, which imposes certain requirements on entities issuing credit cards to Iowa residents. } . The NCUAs economists and analysts compile data on the credit union systems financial performance, merger activity, changes in credit union chartering and fields of membership, as well as broader economic trends affecting credit unions. If you surcharge ANY credit cards, you must surcharge ALL credit cards. } {\plain\f4\fs21\cf2\ulc2 b. John Roska: Stores can charge extra for credit card sales, but rules Let's take a closer look: Convenience fees and surcharges: Common fees businesses charge In short, merchant fees are legal in most states as. } \pard\qj\sl250\tx340 The surcharge is intended to offset the fee that credit card companies impose upon retailers for use of the credit card; however, surcharges also create the potential for abuses by retailers since the assessment of a surcharge or amount There are only a few ethics opinions or rules or professional conduct that take the anti-consumer position of prohibiting the exposure of processing fees to clients. If you get a late fee after you know you paid your bill on time or even if you paid late, you can ask the credit card company to waive the late fee. The over-limit charge under this paragraph shall not be assessed again in a subsequent billing cycle unless in a subsequent billing cycle the account balance has been reduced below the credit limit.