I’m joined for this blog post by Maureen Johnson, of Concierge Payment Systems, who can provide some industry insider knowledge regarding the upcoming changes to credit card surcharge laws.
Amendment to Colorado law
Colorado’s laws regarding surcharges for credit card transactions are about to change. Amendments to C.R.S. 5-2-212 go into effect on July, 2022, and will affect all merchants accepting credit cards.
The Colorado Consumer Credit Code contains certain provisions that, until the amendment takes effect, limit a merchant’s ability to add surcharges to credit card payments made for any sale or lease transaction. The amendment, however, will remove the prohibition on surcharges and, instead, provide caps and conditions.
Under the amended provisions, merchants will now be allowed to add a surcharge when payment is made by credit card, which surcharge off-sets up to 2%the total business cost of providing credit card options. Merchants will have the option to charge a flat fee not to exceed 2% of the transaction, or the “merchant discount fee” actually incurred from their processor for the transaction. With either amount, the merchant must:
–Provide visible signage on premises or a visible display before completion of an online transaction that contains specific, statutory, language.
—Ensure that the surcharge is listed as a separate line item on any receipt
ANY transaction?
The amendment specifically applies to credit card transactions only. Sales and leases paid by cash, check, redemption or gift card may not have a surcharge added. Of extremely important note is that debit card transactions and debit payments are not permitted to carry surcharges. This must be carefully monitored by the merchant, as debit cards are frequently used in electronic payments and not readily discernable from credit cards. Merchants are highly advised to work with a knowledgeable merchant services provider who can help guide them through policies to ensure that debit card transactions are not automatically surcharged, in violation of the law.
In addition, while the provisions about surcharges appear in the Colorado Consumer Credit Code, it is likely that they apply to ALL transactions, even business to business, and non-consumer transactions. The Colorado Attorney General’s office, responsible for prosecution of violation of the Code, has taken the position that the statutory language in the surcharge provisions requires that ALL merchants comply, not just those selling to consumers. While this position may be in opposition to the general purpose of the Code, as a mechanism to protect consumers, and general principles of statutory interpretation, this question has not been decided in Colorado. Until the statute has been scrutinized and the Attorney General position reviewed by the courts, the prudent business owner (no matter who the customer or what the product/service) should review their practices and bring them into line with the new language on or before July 1, 2022.
The Merchant Services View
Surcharging has always been one of major frustration and confusion for business owners and merchant service providers located in Colorado. We are thrilled with the passing of this new legislation. The timing could not be better when you take into account the rising business costs in today’s world. Consumer prices rose on average 2.6% in the year ending March 31,2021.
As Caroline states perfectly, the biggest issues surrounding surcharging by a merchant are compliance with federal, state, and card brands (i.e. Visa, MasterCard) rules and laws. The biggest misconception I see from business owners today are that they believe surcharging can completely eliminate their processing costs. They are also concerned about the impact on their customers.
However, the greatest advantage to this new law is all about choice. The new law now gives business owners choices and consumers options on payment acceptance and fees. Business owners will feel some great relief through being able to save 2% off their card processing costs for those customers who decide to use a credit cards, while also allowing their customers the option to bypass the fee by using cash, check, or debit. This will help keep customers happy and is a win – win. It is important to make this distinction by having signage and employee knowledge of the choices to make this process happen seamlessly.
Another component of compliance is to have the correct product (equipment) and system in place that allow for full compliance with Colorado’s unique statute for surcharging. Also, ensure that your credit card company is advised that you will be surcharging. For example, merchants must notify Visa at least 30 days in advance of implementation of surcharging
As with any statutory provisions, exemptions and nuances may apply to your particular situation. This blog is not intended to serve as legal advice. If you feel that your business may be impacted by these changes, consult with legal counsel to discuss your individual facts and circumstances. You may set up a free consultation with Creative Legal by visiting https://creative-legal.com/contact-us.html or consult with Maureen Johnson at Concierge Payment Systems by emailing Maureen directly at mjohnson@conciergepayment.com (https://conciergepayment.com/). Good luck, and happy surcharging!
Creative Legal, LLC 