30 • OIL
&
ENERGY
Payment Processing
HAVE YOU EVER BEEN INTO A STORE WITH A
sign reading “cash only” or “$10 minimum
on credit card transactions”? This is most
likely due to the fact that businesses
accepting credit cards pay a percentage
of every transaction to the credit card
companies for processing a payment. Now
merchants in all but 10 states have a way
to recover this lost revenue by passing
through credit card processing fees to their
customers at the time of sale.
A recent case against Visa, MasterCard
and several major banks is being called the
“largest antitrust settlement in history.”
The lawsuit began back in 2005 with
over 50 claims being made by merchants
stating that Visa, MasterCard and their
issuing banks conspired to fix the fees that
merchants (including fuel oil, propane, and
gasoline retailers) pay to accept credit cards.
The plaintiffs argued that their actions
effectively removed any competition from
the market, thus allowing the card issuers
to extract exorbitant fees from merchants.
In addition to interest income on late
payments by consumers, credit card issuers
(those banks that issue credit and debit
cards to consumers and businesses) make
their money by charging interchange fees.
“Interchange” is an industry term used to
describe the fees paid by the merchant to a
cardholder’s issuing bank for processing a
transaction. Interchange rates are publically
available and are updated every six months
by Visa, MasterCard and Discover. (For
more information on interchange rates,
NEW OPTIONS
Although Interchange fees are set by
the card brands, they are collected by card
processing networks. Fuel Oil and Propane
dealers are eligible for Interchange rates as
low as 0 percent but in general, merchants
are charged anywhere from 1-3 percent for
processing a transaction, depending on the
type of card used by the consumer. With
surcharging now permitted in most states,
these fees may now be passed on to con-
sumers, but must not exceed the average of
the prior month’s or prior year’s actual cost
of acceptance and are capped at 4 percent.
Under the terms of settlement, a mer-
chant that adds a surcharge to purchases
on a Visa or MasterCard transaction must
also surcharge American Express cards
if they are accepted. However, American
Express has not settled pending litigation
and still prohibits surcharging. Therefore,
if a merchant wishes to surcharge Visa and
MasterCard transactions, they must dis-
continue acceptance of American Express
cards.
There are 10 states that still ban sur-
charging credit card purchases: California,
Colorado, Connecticut, Florida, Kansas,
Maine, Massachusetts, New York, Okla-
homa and Texas. Current legal efforts
are under way to change the law in these
states, and the list is expected to shrink as
individual state laws are revised.
SURCHARGING RULES
Merchants that choose to begin
surcharging their customers must follow
several new rules set by Visa and
MasterCard. Visa and MasterCard must
be provided with 30-day advance written
notice of a merchant’s intent to surcharge.
Also, retailers that surcharge are required
to post a notice at the store’s entrance. The
exact percentage of the surcharge does not
need to be disclosed until the time of sale. In
addition, the customer receipt must list the
amount of the surcharge as a separate line
item. Online stores with a surcharge will not
be required to have a notice on the home
page but will need to alert shoppers of the
surcharge when they reach the page where
credit cards are first mentioned. In most
cases, this means the final step of checkout
when the purchase is being completed.
In addition to these changes in the law,
the settlement also has a damages compo-
nent designed to compensate merchants for
fee-related expenses. The damages portion
of the class settlement consists of two funds.
The first is a cash fund in the amount of
$6.05 billion. Any person, business or other
entity that accepted Visa or MasterCard
credit or debit cards in the U.S. at any time
between January 1, 2004 and November 28,
2012 may be eligible to receive a payment
from the $6.05 billion fund. The second is a
fund equivalent to a portion of interchange
fees attributable to certain merchants that
accepted Visa or MasterCard credit cards
for an eight-month period starting July
29, 2013. This second fund is estimated
to be approximately $1.2 billion. (For
more information on merchant eligibility or
to obtain free claims assistance, please visit
.)
DEALERS BEWARE
This settlement presents an opportunity
for processing companies to take advantage
of their unsuspecting merchants. Some
processing companies are seeking to
auto-enroll their merchants in a claims pro-
cessing scheme. In these cases, a merchant’s
failure to “opt out” of auto-enrollment will
result in a claim being filed on their behalf
and excessive claims processing fees being
charged.
Credit Card Surcharging Now Permitted
By Jenn Matthews, Compliance Specialist, Tiger Payment Solutions
