Legally Speaking: Surcharge and Cash Discounts – What RSPA Members Need to Know

By: Jill Miller, RSPA General Counsel

The issue of surcharging and cash discounts is a hot topic among the RSPA members. 

Surcharges
If you have not heard, Visa recently updated its rules regarding surcharges.  The recent changes include:

  • Merchants may assess a surcharge on credit card purchases, but it may not exceed the merchant discount rate for the applicable credit card surcharged, and in no event, regardless of the discount rate, may a surcharge exceed 3%.  Before the rule change, the surcharge could not exceed the discount rate for the applicable credit card surcharged, and in no event could it exceed 4%.
  • If a merchant intends to implement a surcharge program, it must notify its acquiring bank 30 days prior to implementing the program.  Before the rule change, a merchant was required to notify both Visa and the acquiring bank 30 days before implementing the surcharge program.

While there were only a couple of changes to the existing surcharge rules, there are many rules that remain unchanged which still need to be followed to run a complaint surcharge program.  Fines and fees may be assessed if a merchant is found to be out of compliance with the rules.  I highly recommend all RSPA members work with a company whose systems can differentiate between debit and credit card transactions, who provide merchant training and consumer disclosure signage.  The best partners running surcharge programs are up to date on card brand rules and applicable state laws.

Cash Discounts
There are no laws prohibiting merchants from offering their customers a discount if they pay with cash.  There are programs in the marketplace that are advertised as a cash discount program, but when reviewed more closely, the program resembles a surcharge program.  A true cash discount program gives the consumer a lower price if they pay with cash.  Adding a separate fee and then taking it away if a consumer pays with cash, is not a compliant cash discount program.

Consumer disclosure is an important part of both surcharge and cash discount programs.  Consumers need to be given the details of the amount they will be charged depending on if they pay with cash or credit.  Your processor should have signage you can provide to your merchants.  Visa also provides sample consumer disclosure signage on their website. 

Next Steps
VARs, ISVs, and other payment professionals should continue to educate themselves on cash discount and surcharge programs and familiarize themselves with the state laws and card brand rules by attending online seminars and other educational workshops available on these topics. 

RSPA Member-Only Benefit: Legal Assistance
The RSPA provides members with unlimited phone and email consultations with RSPA Legal Counsel Jill M. Miller along with access to legal templates. The legal counsel also meets one-on-one with members at RSPA events (RetailNOW and RSPA Inspire) and contributes to RSPA’s Connect magazine, Community Connection newsletter, Trusted Advisor podcast, and website. RSPA provides up-to-date legal guidance from an individual that knows the industry and the issues. RSPA members can connect with Miller by email at jmiller@bodmanlaw.com.