Imposing a surcharge to use a credit card is supposed to be against the law in Massachusetts, but plenty of businesses across the state charge customers those fees anyway thanks to a giant loophole we first exposed in February. Now, several lawmakers say it might be time to fix the law and close the loophole.
When Bob Parent of Douglas took his Ford F-150 to get the backup camera repaired after a rear-end crash, he noticed the $500 deposit he paid with a credit card actually came out to $517.50, an increase of 3.5%.
“I noticed it when I looked at the receipt and it said ‘Non-cash adjustment,”http://www.msn.com/” Parent said. “I didn’t think that was right thing to do.”
That “non-cash adjustment” also appeared on his receipt when he paid the balance, a total of $40 extra on top of the $1,100 repair. Parent looked up Massachusetts’ law on credit cards which says “No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card.” Despite that, Parent says he got nowhere when he questioned the owner.
“He said ‘That’s just the way it is. It’s a fee that we charge,”http://www.msn.com/” Parent said.
Parent’s experience isn’t unique in Massachusetts. We’ve heard from viewers who’ve paid credit card surcharges across the state, at businesses big and small, like a diner on the South Shore or at Boch Honda in Norwood. We asked consumer experts about that practice early this year. They say state law prohibits adding charges to pay with a credit card.
“You can offer a discount to your customers for using cash but you may not increase the cost of using a credit card,” said Deirdre Cummings, a consumer advocate and the legislative director of MassPIRG, a nonprofit public interest research group. “In my view, this particular practice would go against the law.“
We took the issue to State Sen Paul Feeney, who is vice chair of the Joint Committee on Consumer Protection.
“It is obvious to me that we have a problem here,” he said. “Most people aren’t walking into a dealership with thousands of dollars of cash in their pocket, they’re using their credit card.”
In the case of Boch Honda, the Massachusetts Division of Banks told them the fee is allowed as long as they don’t profit from it, hire an outside credit card vendor to process the transactions and collect it, and as long as there is an option to avoid the fee by paying with cash. DOB says it’s issued other decisions along the same lines, essentially greenlighting credit card surcharges as long as businesses use an outside company to process the transactions. At the time, Boch Honda told us it tells customers about the fee before they pay and signs are posted at the dealership.
“It was alarming to me to see these opinions from the Division of Banks that really said ‘Yeah, we have this existing statute but if you want to get around it, here’s what you have to do,”http://www.msn.com/” Sen. Feeney said.
Sen. Feeney says lawmakers should figure out how to fix this, since most people pay by credit card most of the time. The House chair of Consumer Protection, Rep. Tackey Chan, agrees something should be done.
“The way went around to do this waiver is new to me,” Rep. Chan said. “This is definitely worth taking some time to try and figure out.”
Many people like Parent often don’t find out about the fee until it’s too late.
“We’re trying to figure out what the best strategy is and how you fix this,” Sen. Feeney said. “The bottom line is, it needs to be changed. We need to do something.”
One issue complicating this is what happened to a similar law banning credit card surcharges in New York. There, federal courts sided with business owners saying the fees are actually protected under free speech because businesses have a right to tell customers what they’re paying for.