As even more retailers back away from a proposed settlement with credit card issuers over payment processing fees, state legislators consider new rules that would prevent merchants from recouping costs with surcharges. In a unanimous decision, the board of the National Grocers Association voted to formally object to a deal with Visa and MasterCard that offered a cash settlement to participants while permitting surcharges for credit card transactions.
The NGA and other merchant trade groups accuse credit card issuers of overcharging for credit card processing, especially in light of government regulations that imposed flat fee caps on most debit card transactions. While retail lobbyists have stated that caps on credit card processing fees would result in lower prices at the checkout counter, banking industry representatives noted that cash back credit cards and rewards credit cards already offer consumers the ability to enjoy those savings as direct rebates.
Merchants in a handful of categories, especially travel and entertainment vendors, can charge "convenience fees" if they could prove that phone and online sales saved customers a significant amount of time compared to waiting in line at a box office. Otherwise, until the terms of the proposed settlement took hold in early 2013, Visa and MasterCard prohibited merchants from passing along credit card interchange fees to customers in the form of surcharges.
However, if state legislators have their way, the new permission to impose surcharges could become irrelevant in many parts of the United States. According to Visa merchant guidelines, state laws prohibiting credit card surcharging are already in effect for residents of California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. An NBC News report cites officials in 11 other states that are currently considering local bans on the practice.
American Express CEO Ken Chenault has repeatedly denounced the settlement between retailers and his company's competitors, stating that interchange fees pay for services such as purchase protection and fraud detection. The Supreme Court recently agreed to consider whether American Express could prevent retailers from filing a similar class action lawsuit by enforcing an arbitration clause in its merchant agreements.