I wrote two years ago asking if a convenience charge to a consumer for using a debit or credit card in payment is allowed, or perhaps a finance charge. See Back to Basics, continued—Is a consumer charge for using a debit card a finance charge? This blog was about Alabama.
States in the United States have a variety of approaches to answering this question.
All of the states I reviewed have no restrictions on the use of a debit or credit card for payment provided the use of the card is strictly voluntary at the discretion of the debtor. Then the follow-up question is whether convenience or processing fees assessed by the card processor can be passed on to the debtor or must they be absorbed by the creditor as an operating cost.
Here, the states differ.
Some states allow collection of processing/convenience fees imposed by the card processor from the debtor. However, only actual costs can be recovered. In other words, the creditor cannot mark up the fees to make a profit. And these states appear to require the creditor to offer alternative payment methods — cash, checks, or money orders — where the debtor can make payment without incurring a fee.
Other states prohibit the collection of costs from the debtor. In these jurisdictions, fees imposed by a card processor must be absorbed by the creditor as a cost of the activity.
Finally, in other jurisdictions, the law is not entirely clear. Therefore, an analysis to determine whether or not a processing/convenience fee is a “carrying fee” should be undertaken. And, if that doesn’t yield a definitive answer, a call to the regulator usually does.
