As a new holiday shopping season gets underway, state lawmakers are looking to tighten the rules on merchants who pass along to customers any special fees for purchases made with credit cards instead of cash.
A measure that has already cleared two committee hurdles in the Assembly would establish several new regulations for transactions occurring in New Jersey to better protect consumers when they are asked to cover credit card interchange fees, commonly referred to as “swipe fees.”
While legal in New Jersey, the practice appears to have become more prevalent amid the COVID-19 pandemic as inflation and other factors have squeezed profit margins for businesses. It has also drawn the attention of the state Division of Consumer Affairs in recent months after the agency said it received a flurry of complaints from consumers about the fees, which often range from 1% to 5%.
Among other proposed new regulations, the Assembly bill would ban merchants from charging customers anything above the cost of any fees the merchants themselves are charged by credit card companies when they process card payments.
Merchants would also have to do more to ensure customers are aware of the extra cost for using a credit card before such fees can be charged on transactions occurring in New Jersey, according to the bill.
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Looking for full transparency
Assemblyman Paul Moriarty (D-Gloucester), who sponsored the bill, said a big component of the legislation is raising awareness among consumers. He cited a recent experience where he opted to pay for a meal using cash after learning the merchant was charging a 4% fee for credit card payments.
“It’s not a lot of money, in some cases, [but] it’s the principle,” Moriarty said during an interview with NJ Spotlight News. “What I would say to consumers is to keep an eye on [merchants] that are doing this and decide if you want to do business with them.”
An analysis by the National Conference of State Legislators indicated nearly a dozen states have enacted laws that prohibit merchants from charging customers a special surcharge when they use a credit card to make a purchase.
‘We just want people to know, full well, if they’re going to be charged to use a credit card, and then they can make that decision, or pay with cash, or some other means.’ — Assemblyman Paul Moriarty
New Jersey is not among them, but earlier this year the state Division of Consumer Affairs issued warning letters to numerous merchants to remind them that state law requires merchants to disclose the total selling price of an item, including any fees for paying with a credit or debit card.
According to the Division of Consumer Affairs, the New Jersey Consumer Fraud Act prohibits the sale of “any merchandise at retail unless the total selling price of such merchandise is plainly marked by a stamp, tag, label or sign either affixed to the merchandise or located at the point where the merchandise is offered for sale.”
That means if a surcharge is being levied on a customer who is paying with a card, the notice of the surcharge must be “conspicuously” displayed “at or near the point of sale,” the division said in a news release that also highlighted concerns about “surprise surcharges.”
‘Swipe fees’
The bill that’s advancing in the Assembly would not prohibit “swipe fees” from being levied in New Jersey, but instead seeks to make the practice more straightforward and transparent when such fees are passed along instead of simply absorbed by the merchant as an added cost of doing business.
Among other provisions, the bill would require verbal notice to be given to the customer in some cases when a special surcharge is passed along to those paying with a credit card. The bill includes some specific rules for online sales and would also require restaurants to put up signs disclosing any special credit card fees in customer service areas and on menus if such fees will be levied on the final bill.
When the legislation went through the Assembly’s Consumer Affairs Committee several weeks ago, Moriarty said restaurants are of particular concern since “you can’t give the food back after you ate it.”
“We just want people to know, full well, if they’re going to be charged to use a credit card, and then they can make that decision, or pay with cash, or some other means,” said Moriarty, who chairs the committee.
An earlier version of the bill — which has also cleared the Assembly’s Financial Institutions and Insurance Committee — sought to cap special surcharges at 2.5%.
But the measure was recently amended to allow fees equal to “the actual cost to the seller” since some merchants may end up getting charged more than 2.5% by the credit companies to process a payment under current industry practices.
That way, Moriarty said during the recent interview, merchants can “recoup what it costs you to process the card,” but at the same time, they “couldn’t make any money from it.”
— Graphic by Genesis Obando
