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Many States Weighing Credit Card Surcharge Bans

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A recent settlement between the world’s two largest processors of debit and credit card payments and a number of merchant groups allowed the latter to begin charging customers more for making payments with credit, but now a number of states are moving to ban this type of additional cost being passed on to consumers.

When the settlement was agreed a few months ago, 10 states had already outlawed the plan, but now lawmakers in 13 states are considering similar action be taken, and it’s expected that another will soon join them, according to a report from NBC News. The states of Hawaii, Illinois, Kentucky, Maryland, Missouri, New Jersey, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont and Washington are all weighing such legislation, and West Virginia is likely to see a similar bill put forth in the near future.

If passed, those states would join California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas as being among those that outlaw such surcharges being passed on to consumers to cover the cost of processing a credit card purchase, the report said. However, experts in the retail industry say that the bills do little to actually protect consumers for several reasons.

For one thing, most retailers will never even bother adding such a surcharge to a credit card purchase, as doing so would likely prove rather unpopular with customers, the report said. Further, because the settlement only came with Visa and MasterCard, they cannot be applied to transactions made with other credit cards, such as those from American Express, meaning that if a merchant accepts the latter type of card, it cannot add the charge for the former two. Consequently, consumers are unlikely to see these charges anywhere, even if their states haven’t banned them.

“It’s a waste of the legislative process,” said Mallory Duncan, senior vice president of the National Retail Federation. “They could take steps to bring greater competition into the marketplace by prohibiting the price fixing of the hidden swipe fees merchants pay to process credit card transactions.”

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Many major national retailers say that the agreement is actually bad for their industry because while it grants them billions in settlement dollars, it also prohibits them from bringing suits against Visa and MasterCard related to credit and debit card swipe fees in the future, meaning those processors might be able to boost them in the future without fear of legal reprisal.

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