Illegal credit card surcharges persist on Long Island

Illegal credit card purchase fees are still a thing on Long Island.

Merchants in many corners continue to add “admin” fees and other surcharges to the customer’s tab to cover their credit card processing expenses even though the practice has been prohibited for years.

As far back as 2018, the New York Court of Appeals ruled that state general business law requires merchants to incorporate those surcharges into the sticker price. Last year the law was updated to clarify the rules and point out that local municipalities could join in enforcing them.

Simply put, there should be no surprises with an item's cost once the customer  reaches for their wallet..

The total price for credit card purchases must include any extra transaction fees. It must be displayed as a standalone, dollars-and-cents number. Merchants cannot ask people to do the math on their own — they can't just tell customers that they should add the cash price plus a service fee, or that the cash price will go up by a few percentage points for credit card transactions.

Gov. Kathy Hochul further clarified the situation last month, telling New Yorkers they should see prices set in one of three ways. Merchants could:

• Charge everyone the same price.
• List the higher credit card price next to the lower cash price.
• Set the sticker price as the higher credit card price — and then let customers know they’d get a discount if they paid with cash. 

The message seems to have registered at only some checkout counters. 

“We just learned about the law,” said Chrissy Auer, who owns Glen’s Dinette in Babylon with her husband, Hapi. “I never got a letter from anybody. I never got anything from New York State” authorities.

The Auers said they learned from a friend last month that the law had been updated, and the company that handles their credit card processing later advised them to change their pricing scheme. This week, customers of Glen’s will get new menus that display cash and credit prices for every item.

Elsewhere, many business owners said they only had a vague idea of the rules. Along Main Street in Port Jefferson, managers of a cluster of eateries and curio shops near the marina said their policies have been the same for years. Some said they have never charged more for credit card purchases. Others did, but didn’t know what the law required.

When a reporter asked why he was still displaying the cash price for slices and then tacking on a 3.99% “service charge” at the counter for every credit card purchase, the manager of a pizzeria said he thought he was following the rules. The manager didn’t want his name used out of concern that the owner would fire him.

The  state Division of Consumer Protection has received 69 complaints about credit card surcharges statewide over the past month. A spokeswoman said the agency usually works with businesses to resolve those disputes.

Merchants are getting squeezed

Consumers' shift toward credit cards has reshaped how many Long Island businesses, especially small, family-run operations, see their balance sheets.

Businesses that were already struggling during the pandemic find themselves pulled between customers who demand they accept credit cards and the processing companies that will take a bite out of the bottom line if they do. 

"The fees are ridiculous," said Melanie Gonzalez, who owns two apparel shops in Port Jefferson and sends 2.5% of every credit card sale to her processing company.

Gonzalez said that for a small business, her prices are already a little above what a big box retailer would charge. She could raise her prices even more to cover the processing fees, but Gonzalez said she decided not to out of fear that she'd lose business. 

"But I can understand those who do," Gonzalez said. "Your margins are already razor-thin, and you are being squashed by inflation and wages."

Violators could see big fines

If you think you’re getting hit with illegal credit card surcharges, the state suggests filing a complaint with the Division of Consumer Protection ( dos.ny.gov/consumer-protection  or by phone at 800-697-1220) or the attorney general ( ag.ny.gov/file-complaint/consumer  or 800-771-7755 by phone).

Authorities often try to work out disputes between customers and businesses through some sort of mediation, but business owners who refuse to change  illegal surcharge policies should know that the new law could result in big fines.

Businesses could be penalized up to $500 for every  violation. A Division of Consumer Protection spokesperson added that the fine could be repeated for every surcharge.  In other words, a merchant who charges 20 illegal credit card fees in a day could see up to $10,000 in fines.

Nassau County Legis. Siela Bynoe (D-Westbury) said she hopes it won’t get to the penalty stage for most businesses: “We don’t want to be penalizing merchants just because they’re not aware.”

Bynoe proposed a law earlier this year that would direct the county to develop a program to educate consumers and businesses about the new law.