Update on CC processing rules

I. Executive Summary:

This posting examines the rules that govern merchant payment acceptance in regards to discounts and Surcharges.  Discounts for paying cash are allowed.  Surcharges are prohibited in 10 US States.  Visa and MasterCard discourage merchants from charging a surcharge.

II. Discounts:

1.    Visa Rules

a.    6.2 Visa merchants may not refuse to accept a Visa product that is properly presented for payment, for example, on the basis that the card is foreign-issued2, or co-branded with the merchant’s competitor's mark. Merchants may steer customers to an alternative method of payment, such as providing discounts for cash, but may not do so in a confusing manner that denies consumer choice. Merchants may also consider whether present circumstances create undue risk, for example if the sale involves high-value electronics, but the card signature panel is not signed, and the cardholder does not have any other identification.

b.    6.3 Visa merchants agree to accept Visa cards for payment of goods or services without charging any amount over the advertised price as a condition of Visa card acceptance, unless local law requires that merchants be permitted to engage in such practice.

Source: http://usa.visa.com/download/merchants/visa-international-operating-regulations-core.pdf

2.     MasterCard Rules:

a.     A merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or an contemporaneous finance charge in connection with a Transaction.  A merchant may provide a discount its customers for cash payments.  A merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing.  For purposes of this Rule

                                          i.    A surcharge is any fee charged in connection with a transaction that is not charged is another payment method is used.

                                         ii.    The Merchant discount is any fee a Merchant pays to an Acquirer so that the Acquirer will acquire the Transactions of the Merchant.

Source:  http://www.mastercard.com/us/merchant/support/rules.html

III. Surcharge Laws:

1.    10 States with No Surcharge Laws: In 10 states it is prohibited by law for retailers to charge consumers a fee for using a credit card (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas). Consumers who are subjected to checkout fees in states where they are protected by law may report the retailer to their state attorney general's office.

·         California

·         Colorado

·         Connecticut

·         Florida

·         Kansas

·         Maine

·         Massachusetts

·         New York

·         Oklahoma

·         Texas

Source:  http://usa.visa.com/merchants/operations/checkoutfees.html#10states

Financial Reform Passes...Now what

Updates on the financial reform bill:

On July 21, 2010, President Obama signed the vigorously debated and much scrutinized Restoring American Financial Stability Act of 2010 into law. For the payments industry, the law's key component is the Durbin Amendment, which, among other provisions, gives the Federal Reserve the power to cap interchange rates on debit card purchases at a level commensurate with the costs of processing those transactions.

Yet a number of questions loom about how, precisely, the amendment's different provisions will be defined and what the ramifications of its enforcement will be.

In her opening address at the Midwest Acquirers Association meeting held in Schaumburg, Ill., from July 21 to 23, Electronic Transactions Association President Holli Targan said the Fed isn't happy that this regulatory task has been foisted upon it because it doesn't know how the industry works.

Among the amendment's components is the stipulation that the Fed cap debit interchange at a level that's "reasonable and proportional" to the processing costs incurred by issuing banks, including costs that go toward fraud management. The cap will apply only to debit cards issued by banks with more than $10 billion in assets.

The law also requires that merchants be connected to at least two networks for debit processing, allowing them to route each debit purchase to the one with the lower interchange rate. Additionally, the law allows merchants to set minimum purchase amounts of up to $10 for the use of payment cards and to offer discounts to customers who use certain payment types over others, for example, cash instead of credit or debit, and debit instead of credit.

The new rules are scheduled to take effect 12 months after the bill's passage, which puts them on track for implementation in July 2011.    From http://www.greensheet.com

More governmental regulation slated

Per the Electronic Transactions Association: Senate Adopts Interchange Amendment

Despite success in getting the U.S. Senate to require 60 votes for passage, the Durbin  interchange amendment to the financial reform bill was adopted by a 64-33 margin Thursday night. Sponsored by Sen. Richard Durbin (D-IL), the measure gives the Federal Reserve authority to regulate interchange fees on debit transactions, using a "reasonable and proportional" standard that gives the Fed plenty of room for interpretation. The amendment also allows retailers to use discounts to steer consumers to networks charging lower fees, to establish minimums and maximums for credit card purchases, and to offer cash discounts. If the Senate, as appears likely, passes the financial reform measure, it will have to be reconciled with a House version that does not include the Durbin provision. ETA Chief Executive Officer Carla Balakgie said, in a statement , that the association and its members were "disappointed" by the vote and "very concerned about the impact it will have on many types of businesses in the electronic payments chain." Connected Pay Q and A: Q: How will my business be affected by the Fed changing/influencing rates? A: Connected Pay clients do not need to worry about renegotiating rates as our rates move with interchange.  You can feel comfortable knowing that as soon as the card networks adjust debit interchange lower, your rates will automatically move based on the Interchange + cost structure. Those merchants who are using the Connected Pay system with their old processor should consider discussing their rates with Connected Pay to ensure they receive the benefit of the decreased interchange rates. Q: What is the real life impact on my business of the financial reform? A: Connected Pay, in general, believes businesses will not be affected by the passage of this bill.  Consumers may feel an impact of not being able to purchase certain goods due to a merchant requiring a specific dollar threshold to be met before a transaction can be processed.  However, the majority of merchants know that if the consumer receives a positive experience through payment convenience, the merchant will benefit from the consumer's repeat business and most important, become a referral source for the merchant.