Credit card fees are a tough burden for both businesses and consumers. For New York small businesses, every dollar counts. Yet the fees for accepting credit cards can choke a business.
In 2024, New York updated its restrictions on what businesses must or can do when they want to pass along credit card processing fees to consumers. The goal of the law, known as General Business Law section 518, is to increase transparency for customers.
According to New York Governor Kathy Hochul, “New Yorkers should never have to deal with hidden credit card costs, and this law will ensure individuals can trust that their purchases will not result in surprise surcharges.” Unfortunately, the New York State may not be quite as business-friendly as many of us would like.
Consequently, we get a lot of questions from our clients about credit card merchant fees and how to responsibly pass them along to consumers. So we wanted to give you a straightforward explanation.
This is it.
Credit Card Processing Fees
Credit card processing fees – also sometimes known as merchant fees – are a percentage of each transaction that businesses pay a third party for the privilege of accepting credit cards. Usually, these fees range from 1.5% to 3.5% of every transaction, depending on which service a business uses.
In the modern age, cash is being used less and less, so accepting credit cards is important for businesses of all sizes.
The Lowdown
In New York, a business has the option to pass along merchant fees to customers. But in order to do it lawfully, the business has to be transparent about it.
The law is fairly simple, however. A seller may charge the buyer a credit card surcharge as long as the total price for credit card purchases, including the surcharge, is clearly and conspicuously posted.
Businesses may also impose a two-tier pricing system where one price is for cash, and another one is for credit cards.
What Sellers Should Do
Sellers must:
- Clearly display both the credit card price and the cash price of each item,
- List the credit card price as the default and offer a cash discount, or
- Use the same price for both cash and credit.
Examples of What Not to Do
New York sellers can’t:
- Post a general sign stating that a standard fee applies to all credit card purchases,
- Add the surcharge separately on the receipt without clearly showing the total price before the purchase,
- Display the lower cash price alongside a surcharge warning on the price tag, or
- Advertise that all prices already include a cash discount.
Consequences of Noncompliance
Violating the law could result in a fine of $500 per violation. Violations add up as time goes on. As a result, it’s important to ensure compliance with the law.
The good news is that there’s no private cause of action under the law, which means that customers can’t sue a company that violates the law. But, the State Attorney General’s Office as well as local governments and government consumer affairs offices can go after a business for violating the law.
Locally, the Erie County Division of Consumer Protection is involved. If a customer files a complaint, it can result in an investigation, and no business wants that.
While Erie County hadn’t created a complaint form immediately after the law originally was promulgated, the complaint form on the Erie County website has been updated to reflect the change in the law.
For further clarification on proper signage, New York Department of State released a YouTube video explaining the new law. The Erie County Division of Consumer Protection also has a checklist on its website.
Questions or Concerns
If you have questions about this law or other compliance issues affecting your business, contact us at 716.839.9700 or info@coppolalegal.com or visit our website to connect.
We’re always happy to help.
