BILL NUMBER: S6125

SPONSOR: RIVERA
 
TITLE OF BILL:

An act to amend the general business law, in relation to prohibiting
payment card networks from assessing penalties against small businesses
or financial intermediaries who fail to comply with the credit card
surcharge notice requirement

 
PURPOSE OR GENERAL IDEA OF BILL:

To prohibit a redundant enforcement mechanism for credit card surcharge
labeling requirements

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 amends section 511 of the General Business Law, to add a new
subdivision 11 to provide the definition of "payment card network."

Section 2 amends section 518 of the General Business Law to add a new
subdivision 3, as it relates to credit card surcharge notice require-
              

ments, to prohibit payment card networks from assessing penalties
against any small business or financial intermediaries for violating the
credit card surcharge notification requirement.

Section 3 sets an immediate effective date.

 
JUSTIFICATION:

Every credit card transaction requires merchants to pay swipe fees to
the bank issuing the card and the payment card network, usually between
rates of two to four percent of each credit card transaction.  All told,
card networks and banks collect over $100 billion each year in swipe
fees from merchants. Some small businesses report that swipe fees repre-
sent the third biggest expense, behind only payroll and rent.(1)

Merchants are technically able to pass on the surcharge to customers
through the price of goods. Nationwide, American families pay roughly
$1,100 in swipe fees per year, which is nine times higher than EU resi-
dents and twice as high as Canadian residents.(2) In New York State,
merchants must follow strict labeling requirements in order to pass on
the swipe fee to customers. Items must either be labeled inclusive of
the credit card surcharge, or merchants must list two prices for each
item, posting the credit card price total above the cash price. A sign
at the store's entrance displaying the surcharge on credit card trans-
actions is not sufficient, according to state law. Complying with this
directive is difficult for many small businesses, considering the number
of products to label, fluctuations in the payment card surcharge, and
confusion caused by Manufacturer's Suggested Retail Prices (MSRP)
labels.

In 2023, state law amended § 518 of the general business law to clarify
that enforcement of the credit card surcharge notification requirement
may be carried out by a municipal consumer affairs office, a town attor-
ney, city corporation counsel, or other lawful designee of a munici-
pality or local government, and that these entities may impose a civil
penalty of up to $500 per violation.

Payment card networks have begun a parallel system of enforcement for
this section of law. They send "secret shoppers" to target small busi-
nesses like bodegas and delis in urban areas to purchase low-cost items
and search for minor discrepancies in pricing displays. By taking photos
of single items among thousands that lack proper dual pricing, secret
shoppers build cases that result in disproportionate fines. Payment card
networks have charged more than $100,000 to small business owners across
New York as a fine for failing to adhere to the state's credit card
surcharge labeling requirements. Small businesses like bodegas, delis,
pizzerias, and salons should operate in accordance with the law and
should also be protected from duplicative enforcement.

This bill would prohibit payment card networks from assessing fees on
intermediary banks or small businesses that do not comply with the cred-
it card surcharge labeling requirement. It would ensure that payment
card networks and intermediary banks cannot charge merchants for
violation of this section and that enforcement for this remains solely
with local governments.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.
(1) https://www.nytimes.com/2024/11/30/business/swipe-fees-merchants.
(2) Senate Hearing on Credit Card Competition, Nov 19, 2024