New Jersey's New Credit Card Surcharge Law: What Businesses Need to Know
On August 18, 2023, Governor Phil Murphy signed a new law that limits the amount of credit card surcharges that businesses in New Jersey can charge. The new law amends New Jersey’s Consumer Fraud Act, so a violation of the credit card surcharge law constitutes consumer fraud and exposes businesses to treble damages (i.e. 3 times actual damages), plus attorneys’ fees.
The law, which took effect immediately, prohibits businesses from charging a surcharge that exceeds the actual cost they incur to process a credit card payment. The law also requires businesses to disclose the amount of the surcharge to customers before a transaction. This disclosure must be made in a "clear and conspicuous" manner, such as by posting a sign at the point of sale or by including the surcharge in the total price of the purchase. Online sellers must provide the “clear and conspicuous” notice on the company’s homepage and checkout page.
Businesses should also be aware that Visa imposes a merchant surcharge cap, which limits the amount of money that businesses can charge customers as a fee for using a credit card. The merchant surcharge cap was originally set at 4%. However, in April 2023, Visa reduced the cap to 3%. This means that businesses in the United States can only charge a surcharge of up to 3% for credit card transactions. Businesses should also be aware that they are not allowed to charge a surcharge for debit card transactions.
Businesses that violate the merchant surcharge cap could be subject to significant fines from Visa. Visa’s Core Rules and Visa Product Rules impose a $1,000 non-compliance penalty for the first violation, with penalties increasing to $150,000 if non-compliance continues for 150 or more days. After 180 days, the penalty increases to an additional $25,000 per month.
Businesses, particularly those New Jersey due to New Jersey’s strong consumer protection laws, should review their surcharge policies carefully to ensure they are in compliance with the new law and Visa’s rules. As noted, penalties can be significant and the attorneys’ fee shifting provisions of New Jersey’s Consumer Fraud Act are designed to make Consumer Fraud cases attractive to Plaintiff’s attorneys.
If you have questions about your business’ payment collection practices, please schedule a complimentary consultation with us through our online scheduling system.
Information contained in this blog is provided for informational purposes and does not constitute legal advice or opinion. You should consult with an attorney regarding the specifics of your matter or legal issue.