If you conduct a significant portion of your business in New Jersey or New York, you might have noticed recent changes Payscout made to the convenience fee amounts. Here’s a detailed explanation of why these changes were necessary and how they impact you.
Why the Change?
Both New Jersey and New York recently passed statutes allowing for “surcharging,” the label both states use to refer to any type of fee added to a card transaction.
However, it’s the card brands, like Visa, that have been more specific and enforce strict rules around these fees, differentiating between service fees, convenience fees, surcharging, and cash discounts.
Visa’s Enforcement
Since spring 2023, Visa has ramped up its enforcement against “improper surcharging.” The penalties for non-compliance are hefty, ranging from $5,000 for the first offense to $25,000 for the third offense. With the advice of our compliance counsel, we determined that the risk of violating Visa’s rules was greater than the risk of violating the new state statutes. Therefore, we opted to follow Visa’s Convenience Fee rules, which stipulate a flat fee on any type of card, rather than the Surcharge rules, which only allow a percentage fee on credit cards.
Aligning with State Statutes
Despite following Visa’s guidelines, we also had to align closely with state statutes, which specify that fees cannot exceed the actual cost of processing the transaction. To balance both requirements, we established tiered fees in New York and New Jersey based on an average transaction cost.
Simplifying the Process
To streamline this, we created three tier categories, setting the fee at approximately 3% of the average transaction size within each tier. This approach provides a reasonable estimate of the actual cost, as required by both statutes.
Impact on Businesses
We understand this may be a significant change, especially for businesses conducting most transactions in New Jersey and New York. However, our goal is to ensure compliance and help you avoid the steep penalties associated with non-compliance.
What Stays the Same
It’s important to note that these changes will not impact previously authorized payment plans, as the authorized fee is stored and will override the new fee calculation method.
Need More Information?
For any additional questions or to review the relevant text from the statutes, please contact compliance@payscout.com.
Understanding these changes can help you better navigate the new fee structures and ensure your business remains compliant. Staying informed and compliant with these regulations is crucial for avoiding penalties and ensuring smooth transactions.
You can continue to rely on Payscout as your trusted payment partner.