|Visa & MasterCard Modify Operating Rules and Regulations to Permit Merchants to Surcharge for Credit Transactions
In response to the preliminary approval of a class settlement agreement, Visa and MasterCard have recently announced changes to their operating rules and regulations as they pertain to merchants' rights to surcharge credit card transactions only, but not debit or prepaid transactions.
Effective January 27, 2013, Visa and MasterCard Operating Regulations have been revised to provide U.S. merchants with the option of adding a surcharge to Visa and MasterCard credit card transactions.
Highlights are as follows:
- Visa and MasterCard will permit surcharging of credit card transactions only. Merchants may not surcharge debit cards even if customers use their debit cards as signature.
- The settlement does NOT change current restrictions on the surcharging of pin debit, signature debit, or prepaid transactions.
- Merchants will be able to surcharge credit card transactions at the Brand level (e.g., all MasterCard transactions) or at the Product level (e.g., World Card or Signature Card transactions).
- Merchants cannot surcharge at the Brand AND Product level for a particular Card Brand (e.g. MasterCard). Merchants may NOT surcharge at the card issuer level.
- Surcharging practices are subject to a competitive "level playing field" limitations that depend upon whether credit cards from other payment network brands impose surcharge restrictions on credit cards and the merchants' costs of accepting those credit cards.
- The surcharge amount will be capped and generally based on the average "cost of acceptance" of the applicable Brand or Product. The rules pertaining to the surcharge amount are detailed in the Visa/MC Surcharge Notice. However, the surcharge amount is capped at 4% even if costs are higher.
- Merchants that elect to surcharge must provide advance written notice to the impacted Card Brand (Visa and/or MasterCard) 30 days prior to surcharging.
- Merchants will be required to disclose their surcharge policy at the point of store entry or on the first page that references the Card Brands for e-commerce merchants, as well as at the point of sale prior to the purchase transaction being completed.
- Merchants will be required to disclose the surcharge amount on the receipt.
- Several states have laws that currently prohibit or restrict surcharging. These states currenlty include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Merchants should consult their legal counsel for advice related to laws and regulations that may impact the Merchant's right to surcharge.
30 Day Advance Notification Requirement
As is stated above, if merchants elect to surcharge, in addition to complying with all the other requirements detailed in the Visa/MC Surcharge Notice, they must also register their intention to surcharge with the applicable Card Brand (Visa and/or MasterCard) and their Acquirer (Payscout, Inc.) at least 30 days in advance. The procedure for merchants to register with Visa/MC is summarized below:
Visa's public website contains information for merchants, including the notification portal merchants must use to notify Visa of their intent to surcharge.
MasterCard's public website contains information for merchants; including the notification portal merchant must use to notify MasterCard of their intent to surcharge.
Other Important Information
- Merchants that elect to surcharge must disclose the surcharge on their transaction receipts. NPC will make updates to targeted terminal/software applications and the necessary supporting systems to facilitate a merchant's compliance with this requirement, essentially supplying an integrated value added solution by adding a surcharge line item on a merchant's transaction receipt. We anticipate our updates may be available by Q3 2013. However, any updates or changes will likely require a merchant to update and/or upgrade its POS solution. In future bulletins, we will (1) share with you our progress with system updates, and (2) communicate identified solutions for you to provide additional value to merchants.
- American Express will permit surcharging (no registration required) as long as the merchant surcharges all competing cards (VS, MC, Discover) as well (this is known as the non-discrimination policy)
- The merchant's contract with Amex must also be free of any verbiage forbidding surcharging
- Discover permits surcharging (no registration required)
Please CLICK HERE for further details of Visa and MasterCard surcharge requirements.