Recently an attorney sought our firm’s opinion regarding an issue involving a client business’s credit card processor. Like many businesses, the client entered into a merchant agreement whereby the company agreed to accept certain credit cards for payments for services and merchandise. When a consumer tried to make a purchase by charging the entire amount on his credit card, the business refused. Angered by the businesses refusal, the consumer filed a complaint against the client with the credit card company, and the client business’ credit card processor alleged that the business’ refusal to accept credit card payments for purchases constituted a material breach of the merchant agreement. Is the credit card processor correct?
Depending on your state’s laws, limitations may inhibit your business’s ability to increase the price of goods or services paid for by credit card, or refuse payment altogether. For example, New York’s General Business law prohibits businesses from imposing surcharges on consumers electing to pay for a good or service with a credit card instead of some other method of payment. So, if your company has a price posted for a particular good or service, and a consumer wishes to pay by using his or her credit card, you cannot increase the price after the fact.
New York law, however, permits you to offer either a different price for goods or services paid for by credit card, or refuse to accept credit card payment for certain transactions. While you cannot impose a surcharge for credit card sales, you are permitted to have two prices; one for cash payments and one for credit payments so long as the business posts these prices conspicuously. If you refuse to accept credit cards for certain transactions, you should post these limitations in the same vicinity where you post information on whether your business accepts credit cards and what credit cards are accepted.
Keep in mind that you should integrate your policies regarding acceptance of credit cards with your business’ processes to safeguard consumers’ personal information, detect fraud and identity theft, and reduce discriminatory or unfair practices. For example, if your staff inconsistently applies your credit card policies and accept payment by credit card for some consumers but not others, consumers may claim your company discriminates against them for reasons not permitted by law. You will need to train your employees on how to handle inquiries about your company’s policy regarding payment by credit card and, if your business is located outside of New York, verify what practices are permitted in your state.
Our firm can advise you as to proper credit card handing, policies and procedures. Please call us at 516-873-3000.