NJ may cap credit card fees charged by businesses. But is it a ‘crazy-high’ figure?
TRENTON – Businesses that charge fees for credit card transactions would be required to alert their customers ahead of time about the added cost, which would be capped at perhaps 4%, under a bill moving through the state Assembly.
Assemblyman Paul Moriarty said he realizes businesses charge the so-called convenience fee because their finances are tight and they want to pass along the cost of taking credit cards.
“I don’t have a problem with that, as long as the customer knows up front that it’s going to cost them more to use a credit card,” said Moriarty, D-Gloucester.
Restaurants adding surcharges
“We have had some instances up in North Jersey where there have been restaurants that have had a credit card surcharge and no one knew about it until the check came. And you can’t give the food back after you ate it, so that poses a slight dilemma,” he said.
“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.”
In addition to disclosure, Moriarty wants to cap the fee to prevent businesses from making a profit by charging more than the processing fees for a transaction.
How much of a fee will they charge?
He said the wording in the bill, A4284, is going to be changed so that the fee is capped at a straight percentage – probably 4% – because otherwise there are a lot of variables, including interchange fees and other costs levied by different credit card companies.
“Four percent, Mr. Chairman, I think is a crazy-high figure for it if we’re going on the premise that we shouldn’t be making a profit on that, that extra credit card fee,” said Assemblyman John Catalano, R-Ocean.
Moriarty said he didn’t disagree but that the transaction fees can run as high as 3.5% plus some extra.
What can credit card companies do?
Scot Mackey, a lobbyist with MBI representing American Express, said a 2% cap would be better, particularly given that before a retail sale there is often a business-to-business transaction that’s also paid by credit card. Combined that could add 8% to the cost of a sale, he said.
“In reality, we’d probably prefer retailers have no surcharges. But we understand the situation, and we’re willing to work with you along those lines and our customers and clients,” Mackey said.
Moriarty said American Express and other credit card companies have a way to fix it: Charge less in transaction fees and tell businesses their credit cards can’t be used in their locations if they impose a surcharge to customers.
“There’s a lot of, let’s say, vig in every transaction and a lot of people getting rich off it,” Moriarty said.
Details of proposed fee-cap law
Sellers who charge a credit card fee would be required to disclose it on a clear and conspicuous sign at the point of sale. Restaurants would need signs in their customer service area or on a printed menu.
For online or over-the-phone sales, clear notice would have to be given before the transaction is processed.
Gas sales would be excluded from the bill.
A business that violates the proposed law would face a fine of $10,000 for a first offense and $20,000 for subsequent offenses for consumer fraud. A violation could also result in cease and desist orders by the state attorney general, punitive damages and awarding treble damages and costs to an injured party.