Is charging a credit card processing fee illegal in California?

California’s Ban on Credit Card Processing Fees: What You Need to Know

Introduction

As a business owner, it’s crucial to stay up-to-date with payment industry regulations. One recent change that has impacted businesses in California is the prohibition of credit card processing fees. This article provides an overview of this important law and its implications for merchants.

California’s Credit Card Surcharge Ban

Effective July 1, 2024, California law prohibits businesses from adding surcharges to transactions processed by credit cards. This ban applies to all credit card transactions, regardless of the type of business or the amount of the purchase.

Rationale for the Ban

The California Legislature passed the ban on credit card surcharges to protect consumers from hidden fees and to promote fair competition. The law is based on the premise that credit card fees are already factored into the price of goods and services, and that adding additional surcharges would place an unfair burden on consumers.

Penalties for Violating the Ban

Businesses that violate the credit card surcharge ban may face penalties, including:

• Fines of up to $1,000 per violation
• Civil lawsuits filed by consumers
• Regulatory sanctions

Exceptions to the Ban

There are certain exceptions to the credit card surcharge ban:

• Businesses may charge convenience fees for non-credit card payments, such as debit cards or cash.
• Businesses may offer discounts for using specific payment methods, such as loyalty programs that provide incentives for using a particular credit card.
• Businesses that have a contract with a credit card company that specifically allows for surcharges may continue to charge them. However, these contracts must have been entered into prior to July 1, 2024.

Impact on Businesses

The credit card surcharge ban has significant implications for businesses in California:

• Reduced revenue: Businesses that previously relied on credit card surcharges as a source of revenue will need to find alternative ways to offset these losses.
• Increased competition: The ban levels the playing field for businesses, as they can no longer pass on credit card fees to customers.
• Improved customer relations: By removing hidden fees, businesses can enhance customer satisfaction and build trust.

Compliance Tips

To ensure compliance with the credit card surcharge ban, businesses should take the following steps:

• Review their payment policies and remove any references to credit card surcharges.
• Train staff on the new law and its requirements.
• Consider offering alternative payment methods, such as debit cards or cash, and clearly display any associated convenience fees.

Conclusion

California’s credit card surcharge ban is a significant change that impacts all businesses in the state. By understanding the law and its implications, businesses can avoid legal penalties and maintain compliance. Furthermore, they can leverage this change as an opportunity to enhance customer relations and establish themselves as fair and transparent business partners.