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One of the best things about being a local newspaper publisher is you get to talk with a wide variety of people. And I usually learn something new with every conversation.
Last week, this email came to the Cherokee Scout.
“While scrolling through Facebook, I came across a post from a local business that they, like many others, will be instituting a credit card surcharge. One commenter noted that businesses are not permitted to apply the surcharge to debit card transactions. Since I had never heard this caveat before, I decided to look into it. If it is true, I think many of our local businesses are mistakenly not differentiating between debit and credit cards when applying the surcharge. It would be of great public interest and value to the community for you to investigate.”
Turns out, the person who signed “a concerned citizen” is exactly right.
To get a legal opinion, I contacted the N.C. Press Association hotline. Here’s what I received back from the attorney.
“My understanding is that merchants cannot charge a surcharge for debit card transactions. On a federal level, the Durbin Amendment (part of the Dodd-frank Wall Street Reform & Consumer Protection Act) limits transaction fees imposed on merchants by debit card issuers,” wrote Ashley Fox, associate attorney with Stevens Martin Vaughn & Tadych.
“Further, credit card companies may also have rules forbidding U.S. merchants from charging a surcharge on debit cards purchases. Both Visa and Mastercard prohibit U.S. merchants from applying a surcharge to debit card transactions.”
Many websites also make this clear – from the Consumer Financial Protection Bureau, an independent agency of the federal government, to private businesses like staxpayments.com, which wrote this:
“Are debit card surcharges legal? The short answer is no, it’s not legal to surcharge debit card transactions. Major card issuers expressly forbid surcharging debit card transactions. The legality of surcharges is further influenced by state laws. For example, Texas law specifically bans debit card surcharging altogether, and Connecticut bans surcharging for both debit and credit card transactions.”
As part of the Durbin Amendment, the interchange fee for debit card transactions cannot exceed $0.21 plus 0.05% of the transaction fee, plus a $0.01 fraud prevention fee (when eligible). On average, debit card processing fees amount to about $0.34 per transaction, according to the Federal Reserve. So having debit card users pay the same 3-4% percent surcharge as credit card users is unfair and taking advantage of the customer.
In checking around the county over the last week, few businesses distinguish between credit and debit cards. I have been charged an incorrect fee dozens of times since I routinely use my debit card.
Before someone gets the bright idea to take this matter to court, I strongly advise local businesses to check with their financial advisor ASAP to make sure they are doing the right thing.
David Brown is publisher of the Cherokee Scout. You can reach him by phone, 828-837-5122; email, dbrown@cherokeescout.com; or on X @daviddBstroh.