NYS taking aim at hidden credit card processing fees

Credit card users soon may be able to wave goodbye to hidden processing fees.

Long Island authorities on Sunday can begin enforcing a state consumer protection law that requires businesses to be much more transparent about how they’re passing on those surcharges to customers.  

The law, which Gov. Kathy Hochul signed Dec. 13, codifies previous legal interpretations from the New York State Court of Appeals and clarifies rules that merchants must follow when their customers pay with credit cards. It also authorizes local governments to enforce those rules.

Previous reporting by Newsday showed that some business owners thought they were complying with the law when they were not. 

Going forward, the law will require New York merchants to include credit card fees in the sticker price. They are not allowed to display just the lower “cash” price for an item, even if they post a sign that says they’ll charge more for credit card purchases.

Merchants are also forbidden from adding credit card surcharges as extra line items to a bill, which sometimes have been concealed with generic descriptions like “convenience,” “service” or “technology” fees. And customers cannot be charged higher surcharges than what the merchant pays in processing fees.

“New Yorkers should never have to deal with hidden credit card costs, and this law will ensure individuals can trust that their purchases will not result in surprise surcharges,” Hochul said in a statement.

The state has produced a video highlighting what retailers must do to comply with the law. 

What you should see at the register

Credit card processing fees, which can range between 3% and 5% of the price, have been increasingly popping up from grocery stores to hair salons. In many cases they’re a surprise entry at the bottom of the receipt as some businesses do not clearly communicate higher prices for using credit cards.

The state’s Division of Consumer Protection, which recently published additional guidance related to the new law, said that businesses must list the total price of an item, including any credit card fees.

They have a few options that will comply with the new law. Merchants can, for example, list both the credit card and cash prices. Or they can list the higher credit card price while advertising a discount for cash. And they can simply charge the same price for credit card and cash transactions.

Businesses that violate the law may be liable for civil penalties of up to $500 per violation, according to the Division of Consumer Protection.

How to report violations

If you think a business is not following the law, state authorities recommend filing a complaint with the consumer protection office, which can be reached on the web at dos.ny.gov/consumer-protection or by phone at 800-697-1220. You can also file a complaint with the New York attorney general’s office at ag.ny.gov/file-complaint or by calling 800-771-7755.

Jordan Hoffman, a Babylon attorney who has closely followed the development of the credit card processing law, said he hopes that the local enforcement will kick-start a broad shift in the way merchants display their prices.

The restrictions have “more teeth now because it’s part of an actual statute in the books instead of case law that didn’t have any real official guidance to it,” Hoffman said. “It’s easier for them to enforce it now.”