February 20, 2024
Navigating New York's Credit Card Surcharge Law: A Guide for Businesses
New York State recently enacted a groundbreaking law that directly impacts how businesses handle credit card transactions. This legislation, known as the Credit Card Surcharge Law, amends General Business Law Section 518 and took effect on February 11, 2024. The law allows businesses to charge customers for credit card fees, marking a significant shift in the state's approach to transaction cost management. For businesses operating within New York, understanding the nuances of this law is crucial for compliance and maintaining good customer relations. Here's an essential guide for navigating this new legal landscape.
Overview of the Law
The law permits businesses in New York to pass on credit card transaction fees to customers. Previously, businesses absorbed these costs, often leading to increased prices for goods and services to offset the fees charged by credit card companies. This change aims to make transaction costs more transparent and allows businesses to manage expenses more effectively. The law applies to any individual or business engaged in the selling of goods or services.
Key Provisions
Transparency Requirement
Businesses must disclose any credit card fees to customers before the transaction is completed. This disclosure must be visible at the point of sale and on any receipts provided.
Fee Limitations
The amount that can be charged to the customer as a credit card fee is capped. Businesses can only charge the actual amount they are assessed by credit card processors, ensuring fair treatment for consumers. In addition, the law prohibits businesses from charging a final price (including the credit card surcharge) that is greater than the posted price.
Non-Discrimination
Businesses cannot discriminate against customers who pay with credit cards by offering differential treatment or services.
Penalty for Non-Compliance
Businesses that fail to comply with the new requirements could face a significant penalty, upwards of $500 for each transaction that occurs that is non-compliant with any aspect of the new law.
Implications for Businesses
Financial Management
This law offers businesses a new avenue to manage their financial overhead. By allowing the pass-through of credit card fees to customers, businesses can potentially reduce operational costs and improve their bottom line. However, companies must weigh this against potential customer perceptions and the competitive landscape of their specific industry.
Pricing Strategies
Businesses may need to revisit their pricing strategies. The ability to charge credit card fees separately could reduce the overall price of goods and services, making prices more competitive if the market conditions allow.
Compliance and Communication
Ensuring compliance with the law requires clear communication strategies. Businesses must update their point-of-sale systems and train staff to ensure that credit card fees are disclosed transparently to customers. Failure to comply could result in penalties and damage to the business's reputation. Simply posting signage making consumers aware of an additional fee does not make it compliant with the new law. For example, the Division of Consumer Protection set forth the following examples that do not comply with the law:
- The business posts a sign on the door and at the register stating an additional 3.9% surcharge will apply for credit card purchases
- The business has a 4% cash discount incentive built into all pricing and posts a notice stating that any purchases made with a credit or debit card will not receive the cash discount and a price adjustment will be displayed on the receipt.
- A convenience fee, service fee, administration fee, non-cash adjustment, technology fee, processing fee, etc. is charged to credit card users and added as a separate line item on a customer receipt.
- The price tag of an item shows “$10.00, plus 4% if paying with a credit card.”
New York State Guidance
The Division of Consumer Protection issued guidance to assist businesses with the Credit Card Surcharge Law, and how to remain compliant. Businesses still have several options to recoup the credit card transaction cost while complying with the law. The following examples and practices do comply with the new law:
- The business clearly lists both the credit card price and cash price.
- The business lists the higher credit card price for items and services and offers customers a discount for paying with cash.
- The business charges the same price for cash and credit transactions.
Best Practices for Implementation
Update Point-of-Sale Systems
Ensure that your POS system can automatically calculate and disclose the credit card fee to customers before the transaction is completed.
Staff Training
Train your staff to explain the credit card fee policy to customers clearly and confidently.
Customer Communication
Consider implementing signage at the point of sale and adding information on your website to educate customers about the credit card fee policy. Transparency is key to maintaining trust.
Monitor Customer Feedback
Pay close attention to how your customers respond to the introduction of credit card fees. Their feedback can guide adjustments to your approach.
Conclusion
New York's Credit Card Surcharge Law represents a significant shift for businesses and consumers alike. While it offers businesses a way to manage costs more effectively, it also requires careful implementation to ensure compliance and maintain customer satisfaction. By adopting transparent practices and clear communication, businesses can navigate this change successfully. For businesses navigating these new regulations, consulting with a legal expert can provide tailored advice and strategies to ensure seamless compliance. As always, staying informed and proactive is the best strategy in adapting to legal changes affecting your operations.
