The Payments Experts Podcast
Expert payments attorneys discuss the electronic payments industry from a legal perspective.
The Payments Experts Podcast
Surcharging Compliance for Merchants: Dual Pricing and Cash Discount What You Need to Know | PEP039
Ever wondered how the payment landscape has transformed from outright prohibitions on surcharges to complex legal frameworks? Join us for an eye-opening discussion with Associate Attorney Leo Arzumanian, who sheds light on these intricate changes. We promise you'll walk away with a deeper understanding of state-specific regulations and the implications they hold for both merchants and consumers. From Minnesota's new consumer protection laws to New York's dual pricing allowances, we'll unravel the tangled web of rules and requirements that govern surcharging practices today.
Leo Arzumanian takes us on a journey through the nuanced world of credit card surcharging, exploring the challenges merchants face in states with stringent laws and caps. We dissect recent updates from card brands like Amex and their impact on businesses. Discover how California's "junk fees law" and its exemptions for restaurants are influencing a broader trend towards transparency and compliance. As federal oversight diminishes, states are stepping up, creating a patchwork of regulations that every business owner must navigate.
Our conversation doesn't stop at the laws; it also extends to the future of payment systems and the decline of cash. We consider the architectural issues of current payment rails and explore alternative cost-effective methods like ACH. Leo shares insights on why class action lawsuits around noncompliance are rare, and we discuss the challenges small businesses face in maintaining compliance across multiple jurisdictions. This episode is essential for anyone looking to understand the legal landscape of transactions and the opportunities that lie ahead in this evolving field.
A payments podcast of Global Legal Law Firm
Look, I like the fact that merchants are being given the freedom of like. I'll give you a for instance. Here's a real practical example. I have to replace my roof. Right, I got solar. Part of the reason in one area that I have to replace my roof is because the solar company made a hole. I have to have the solar panels removed and reinstalled. Now I can go to the solar company and they will probably do it for me, but then I'm subject to the solar company's schedule and I got a roofer who's got his schedule and the roofer's way. More important, I'm now left with the choice Do I have the roofer do it and pay him and try to get the money back? Take the delay? I have no good choice, right, like? When I look at what's going on, that choice to me isn't most optimal. Right? This is the same thing that we're talking about for consumers or merchants. Right, like? What does a merchant do? Great, I have some freedom of choice. How good are these choices and do they completely apply to me?
Speaker 2:Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode. We're really excited to have in studio with us today Associate Attorney Leo Arzumanian, who's part of our transactional team, as well as a regular here on the Payments Expert podcast, the founding and managing partner of Global Legal Law Firm, christopher Dryden. Gentlemen, welcome. Today we're talking about surcharging, dual pricing, everyone's favorite topic.
Speaker 1:Woo-hoo, all right, yeah, so I can kind of kick it off a little bit. Leo is somewhat of an expert in this. Over the last I don't know 24 months, I would say this topic's gotten really hot and active For a long time there. I mean, anybody in payments would know that's been in it for a while. Surcharging was something that was really taboo for a long time. A lot of states for a long period of time basically said you couldn't do it. Then, through court cases, through some lobbying with state legislatures, it kind of eased up. There was a court case that basically said that the inability to allow for surcharging was a violation of constitutional due process, and so ultimately there has been a relaxing on it.
Speaker 1:What we've seen recently is it's gone from complete prohibition to extreme qualifications of particular types of transactions. As to, you know, some states have caps, and now we're just talking about the law, not really the card brands. Some states have caps. Some states will allow you only to pass through what you pay, you know. So, in conjunction with all of the changes in the laws, there's also been movement by the card brands. For a long time it was, you know. You have to choose whatever it is and it has to be a uniform surcharge across all credit card transactions. It used to be a 4% cap. Mastercard maintains the 4% cap. Visa's gone to 3%. Used to be a 4% cap. Mastercard maintains the 4% cap, visa's gone to 3%. So you have two masters here.
Speaker 1:At least our clients do that are using electronic transactions for their sales Because on the one hand, they have to and this is a big subject matter category but on the one hand they have to deal with the card brands and whatever their rules are. And then, on the other hand, they've got consumer protection laws associated with individual state laws. There's no federal mandate related to this, but it's very interesting to try to find whose rules or laws you're following. They don't always align and then, on top of that, there are different types of transactions that might trigger other laws. So you know, there's the sale of a product, there's a sale of a service, there's actually taking up like a partial payment in for the purchase of a product, like such as a car. You know, for particular industries, when you market in that industry, there are laws already around marketing in that industry to consumers. Now you sort of have to take the card brand rules and the laws and any federal laws related to it that might get triggered because of a type of business, and now analyze all of that.
Speaker 1:What Leo's done is, as these questions have come into our firm, he's been the point guy as to run down all the laws and to see what applies and what doesn't, and really the purpose of this podcast is to give a little bit of an overview, like an introduction to Leo, but then an overview of the subject matter that we've been working on, that he's primarily been working on, and I've actually been able to write his coattails and learn a lot about the research he's been doing and just sort of formulate more questions that are coming in through our clients, because it's not always just a simple I'm buying a candy bar over the counter, right? I mean, there's a lot of things that go on. So that's really the purpose of this, because, um, in addition to surcharging, we have something called cash discounting, which means that, um, you can give people a discount if they pay in cash or pay by a debit card right.
Speaker 1:And then there's also all of these consumer protection mandates about how you visually display the fact that you might have two different types of prices one that includes a surcharge and one that doesn't. So that's kind of like an overview of what we're going to talk about today. You know, ultimately I think we'll just start with the card brand rules, because that's what's the most prominent for us with our clients. That's the first stop is looking at what they say.
Speaker 3:And I'd like to actually real quick say I mean maybe we step back and kind of give a quick definition of what search charging even is.
Speaker 1:I think that's a great idea.
Speaker 3:I think a lot of people don't really know what it means, and I think the most simple way to think about it is it's the act of a merchant passing down the cost of acceptance of processing a credit card transaction down to the consumer, and I think that's the easiest way to kind of explain that without getting into the granular details of things.
Speaker 1:Yeah, I mean, actually, if you back up even further, a surcharge is just a charge in addition to the price of something, Right, right. And the question is when you're doing a surcharge on a credit card transaction, leo's right, it's solely whatever the cost of the expenses to take that card in that form of payment.
Speaker 3:And we've had questions from clients can you surcharge debit card transactions? And that's an absolute no, you can only surcharge credit card transactions.
Speaker 1:Well, actually I'm going to filibuster for a second. We got an email that I haven't even sent it over. A client of ours actually got an email from Amex that forwarded something in the Amex rules that said that they had to do the surcharge uniform over all. Amex that forwarded something in the Amex rules that said that they had to do the surcharge uniform over all Amex cards. And Leo and I started talking about it. It was like, well, I don't think Amex has a debit card, so I guess it would just be all different types of Amex cards. I don't know. I'm not fortunate enough to have an Amex card, so I don't know. I know there's different levels of membership.
Speaker 3:So maybe that's what they were talking about. Okay, because I've never seen an Amex debit card, so it might be just uniform surcharge over different types of Amex credit card. Yeah, maybe something like that.
Speaker 1:But it's interesting because even Amex is kind of flexed and I've never really seen Amex say anything Right. So there's even some question as to what is permissible under Amex rules. That's something I think we're going to look at now.
Speaker 3:Okay, yeah, that's interesting to know about that. But generally that's what surcharging is and a consumer goes to the store, they see the price of a good or a service. If a merchant wants to surcharge, it really comes down to, first of all, what percentage are you tacking on right. Visa it's comes down to, first of all, what percentage are you tacking on right. Visa it's 3%. Cap MasterCard it's 4%. But then you have this other issue you have to think about as a merchant. That is that some states actually have caps in the books, right. So I think Colorado is 2% max, or the cost of accepting the credit card transaction, new York and New Jersey it's the cost of acceptance. A couple other states might have percentage caps Minnesota.
Speaker 1:I believe is 5%.
Speaker 3:Still, there are a couple of states that are just holdouts that will not allow you to surcharge A couple of states that you are entirely prohibited from surcharging Maine, massachusetts, oklahoma, puerto Rico and I think that covers all of them.
Speaker 1:Connecticut as well. Yeah, connecticut's the big one, yeah, totally.
Speaker 3:So five states at the moment entirely prohibit start charging.
Speaker 3:So there's, like you know, as a merchant, you have all these things going on.
Speaker 3:You've got to deal with the card brand rules, state law and then what Chris mentioned earlier, which is now there's this whole new set of laws coming down in various states where it's consumer protection and how you display the prices of goods or services.
Speaker 3:So you know, for example, minnesota recently passed a law that went into effect January 1st 2025, where all quote unquote, mandatory fees have to be displayed in a specific way. And then they list all the various ways, like I think there's think there's a sizing requirement, there's a requirement on, you know, the price has to be built in to the reflected price of the consumer fees and so forth. But then they have like a three-part test that determines what is a mandatory fee. And it's interesting Me and Chris were discussing potential, I guess almost like a loophole around this law and that a mandatory fee does not include surcharges if the consumer can reasonably avoid a credit card transaction. What does that mean? That just means if a merchant offers a consumer the right to purchase a good or service with cash or debit card, then this new law doesn't really apply to that merchant.
Speaker 1:Yeah, it was really weird. Leo sent me this long email because I'd asked him for some updates and I'm reading through the email and he's asking some really provocative questions and it didn't really make sense. And I think what is important to note is that when you read some of the state laws around this subject matter, these are people not in the industry, maybe not familiar with the industry, not understanding necessarily it could be part trying to do something that looks optically effective, but maybe they don't really want to put a mandate on people or on businesses associated with it or giving them enough flexibility so that they don't want to make the law punitive. They want it to be something that is maybe best practice. It was really weird the way that the Minnesota law. You would almost need to go back to the legislative notes to see what the purpose of what they were trying to accomplish is. And then you so that's Minnesota, right, that's brand new. Other states, not so much Like New York. It seems fairly penal, like the way that they operate.
Speaker 3:Yeah, and New York. I kind of like the way they did it in terms of like, at least it's very clear, right, yeah, they established the caps on the surcharging, which is just the cost of acceptance for processing the credit card transaction, and they also implemented, in the actual language of the law regarding surcharging, that they allow dual pricing, and Chris mentioned earlier you know he touched a bit about dual pricing, cash discounting, but really I guess those kind of fall under their own umbrella out dual pricing, cash discounting, but really I guess those kind of fall under their own umbrella. And the way I view those is dual pricing is just the method of essentially listing two prices for your good or service. So you got the credit card price and the cash price, and the way New York does it I think so far might be the most restrictive across the country. But my suggestion for merchants would be to follow New York's laws, because it does look like a lot of states are turning in that direction and I'd rather be overly compliant than, you know, underly compliant, if that's the word, or in non-compliance.
Speaker 3:And really what New York mandates is that the cost of processing the credit card transaction is built into the reflected price of the good or service and then if you want to offer your customers a discount for that price, you would offer a cash discount, which would be the second price that they see. So let's say a price of a good or service is $100, but the cost of processing a credit card transaction is $3 for that merchant. They built that into the reflected price, so it's $103. But they offer a cash discount of $3 and list it as $100. And I kind of think that framework, if merchants follow that, makes the most sense and might be like the easiest way to kind of make sure you're on top of things. Yeah, I agree.
Speaker 1:But the problem is, is that the flexibility, like the first thing I would think of is a supermarket, right, unless we go to digital signage with everything. That's a tough one because you get something like inflation and all of a sudden you have to up prices. So what's the cost, even in the labor associated? I mean we've got. What's the cost, even in the labor associated? I mean we've got POS clients and they have.
Speaker 1:You know, I think the liquor store is the one that has been the most prominent, but you know, liquor stores display their prices. Now, there's not like a million bottles of liquor, you know types of liquor, I should say, but you know there's probably at least 500 various types in a liquor store, if not more, and each one of those needs to have, if you're in New York, a sign with the credit price and then the cash price and, like I said, I mean with something like inflation where your pricing is really going to change. I think what gets lost is that the law and the way that it operates for clarity to consumers is great, but the burden on the small merchant potentially is something that I don't necessarily think is considered when they're enacting these laws. Now, maybe this will be the push that everything has digital signage. I don't really know what that looks like. I mean, we already have enough screens.
Speaker 1:Who fucking knows, right, I mean, but at some point, what would make sense? Look, anybody who's entrepreneurial, there's a great business idea for you. If it's cost effective, I don't know. But this is like one of those situations where the regulation makes sense, but the implementation of the regulation has a burden. Yeah, the cost of clarity comes with a burden. Yeah, totally. And so that's why I think New York, in being restrictive though it's clear, it's just tough to comply with Because you have to make a decision. Can I have an extra employee?
Speaker 1:Because my cost of potentially having to do this, constantly updating the pricing and the interesting part was is and I can't remember and I do believe it was new york, but I looked at this before because some of the pos people they got, and I think that this is on the card brands too a little bit because the card brands send out secret shoppers and they'll fine you if you're not compliant with how they want to also do this. And the fines it's like doing 10 days in jail for going 70, right, I mean, the fines, like the amount of the fines, don't really equate to the infraction, but there has to be a clear display equate to the infraction, but there has to be a clear display and to comply with the card brand rules and the law the POS providers came up with. Well, hey, at the checkout we can give them both prices, right, and the idea was let's give them both prices in a way. And so I saw a POS provider have like this split screen where when the SKU code was scanned, like it would show it right, and it was a big screen. I mean this wasn't a small screen, so it was something that you know the consumer could really look at and see.
Speaker 1:You know what the cost differential was. And you know I'm thinking to myself okay, well, this seems like a good middle ground. And then they just said no. Like I mean, they said no, this wouldn't be compliant. It has to be at where the product is displayed. It can't be in a checkout process.
Speaker 3:All points of entry, points of sale everywhere. I think kind of one of the just to jump in real quick one of the other main takeaways when it comes to surcharging for merchants. I think another easy way to think about are you doing this properly? Is does the consumer know what he or she is going to pay upon checkout, right upon checkout right? And one of the common phrases that I keep seeing when I'm researching the laws around surcharging and cash discounting, dual pricing, is clear and conspicuous disclosure. And what does that mean? I mean, really just think about it as how clear are you communicating your pricing to the end buyer right? And I think that's an important kind of takeaway when you're trying to figure out am I properly complying with all these? You know the card brand rules, the state laws, et cetera, because that that comes up in almost every piece of law that we've seen is clear and conspicuous disclosure.
Speaker 1:Well, but the other thing is is that you know, dealing with the card brand, it's private.
Speaker 3:Yeah.
Speaker 1:I mean we're not talking. I mean we're not talking. I mean I think it's quasi-governmental but that's a long conversation for another day. But I do believe that complying with that is totally different than am I actually compliant with the law. So I think the idea around surcharging, dual pricing, cash discounting, is this whole, I think where the ambiguity comes in is the display.
Speaker 1:What you just focused on, that clear and conspicuous disclosure to the consumer about what's really going on At a certain point in time. I understand it, especially if you're doing anything at a distance, right, I mean, I think it's. I think the application even would be different, maybe between online sales versus in-person sales, right, I mean. But I don't think the legislation or even the card brand rules are really well thought out for each. I mean, they're trying to do something that I think is beneficial, but they're creating burdens that are unequal and I think that at some point those will get tested somewhere. The card brands I don't think you're allowed to test anything because they just say no had some changes in the law and maybe there's some test cases associated with that. Maybe the card brands would take a cue from that and make you know its rules.
Speaker 1:You know, be congruent with with a state that came out with something that was really clear for all types of sales, right, yeah. Yeah, I mean you know the one that was interesting for us and I can let Leo talk about this in great detail. But there were a lot of things that were happening in California. We happen to have we're sitting in California, so this is where our offices. We have an office in Florida as well, but in California it was primarily happening at restaurants. They were just tacking on fees to all sales. It didn't have to be for a credit card, a debit card. It was a general service fee trying to absorb the cost of inflation and increasing wages here in this state.
Speaker 3:Or so-called COVID fees. I've seen those a couple times.
Speaker 1:And there were these fees. So, in order to not be non-compliant with the card brand rules, more than anything, they were just making the fee on top of the entire ticket price and you know, I guess it's been referred to as junk fees. And so California came out with a law and last year in June and Leo's done a ton of research it was SB 478. Yeah, and why don't you take it away? Because there's been a lot that we've actually researched as that law has gone into effect and how it really applies.
Speaker 3:Yeah, so California SB4-SANIAE went into effect I want to say, july 1st 2024, also known as the junk fees law and essentially what they did was to try to counteract what Chris just mentioned with these, you know, tack-ons of surcharges that were being improperly added on to, you know, the cost of a good or service, and what they did was, you know, again, similar to Minnesota in some ways, or I should say, minnesota copied California in some ways, but all essentially mandatory fees must be disclosed up front and essentially built into the price that's being listed. However, they received a lot of pushback, with some exceptions like government shipping costs and government taxes.
Speaker 1:Yeah, taxes, I think yeah.
Speaker 3:And they started to receive a lot of pushback, especially from the restaurant industry, which led to, I want to say, senate Bill 1524, which essentially created an exemption to California SB 478, just for the restaurant industry industry, where, okay, this law no longer applies to you in that you don't have to build in the surcharges into the reflected price of a good or service in the restaurant industry, but again, the pricing has to be clear and conspicuous and has to be reasonably tied to the good that you're providing. So it's kind of interesting where California, you know, went down this restrictive route but then started to get a lot of pushback and made an exemption for one specific industry. And I'm kind of curious to see. I don't know.
Speaker 1:They've done that at other times with with payments Like so sidebar the the California in and of itself. Basically you know the 1099 classification. They killed all independent contractors except true independent contractors. There used to be like a nine point test based on like scope of control, a principal to agent. That went away and it was like a three part test where basically everybody's an employee unless you're truly not an employee, where basically everybody's an employee unless you're truly not an employee. And they made a carve-out for certain principal-agent relationships, including payment process and sales agents and ISOs. So if you lobby hard enough in California, you can get your voice heard.
Speaker 3:You can get the exemption For sure, yeah, so I thought that was interesting. And then Chris and I started doing some more research as questions come in from clients, and we also realized there's an exception for business to business. Yeah, so California SB 478 does not apply when it's a transaction between a business and another business. If it's a business to consumer it applies, subject to the various exceptions that are outlined in the law. But you know, I just think that you know California SB 478, minnesota's new law regarding you, law regarding the advertising of a price of a good or service. Other states they're all kind of following this trend of how are we going to make things more clear? For consumers are involved in drafting these laws, necessarily know what goes on behind the scenes and don't really get into the granular level, that of you know how these things operate in the payments industry, maybe even aren't consumers at this, and maybe even aren't consumers.
Speaker 1:At this point I don't say it to be mean, but I I think the trend and you know this has just been things that are happening around us at all times. Like I'm, I'm a big proponent of looking at the picture and seeing what it is. Not seeing what I want it to be, but just seeing what the picture is. And, um, regardless of who you voted for, donald Trump is president and there are a lot of things that are happening and there's just a process that's going to play out.
Speaker 1:But one of the things that is very clear in the first month of his administration is that they want to unravel some of the federal apparatus that they think is overkill and in the process of doing that, there is going to be a void and stuff like this Consumer protection I mean, I don't think the FTC will go away. They're trying to kill the CFPB, right. So I think that in that void, states will have to step in and there will need to be more state by state regulation, which is a nightmare for anybody who does business, multi-state happening and that people need to be aware of, and that part of undoing what we have at the federal level to give standardization to some things that's going to go away and we are going to get disparate state laws and that's just, I think, going to be a wave over the next couple of decades, as, kind of like, the federal government maybe plays a lesser role in some of this subject matter.
Speaker 3:Now that's a good point and I actually want to add on. Earlier I was talking about some key things that merchants should focus on when it comes to surcharging. You know, clearing conspicuous disclosure that's a big one, kind of some preliminary things that a merchant should be aware of if they want to start implementing this practice of surcharging. The card ban rules require pre-registration, so you have to notify I believe Visa says you have to notify at least 30 days before you implement search searching. You have to notify your acquiring bank. So there's various things like that being aware of the caps 3% with Visa, 4% with MasterCard, the various disclosure requirements.
Speaker 3:I know Visa puts out publications, although they don't update them too frequently so some might be outdated, but they put out publications of like suggested signage and verbiage at the point of sale, at the point of you know disclosure, you know, at the point of disclosure, point of sale, et cetera. Oh, I also know another big one prohibited extra, extra fees. So essentially Visa and I believe MasterCard is the same they don't allow you to list out other fees when you're surcharging, like, so you can't tack on convenience fees with surcharges or tech fees with surcharges. If you are going to surcharge it has to be just a surcharge line item on the receipt, separate from everything else, but no other fees tacked on yeah, that's really interesting.
Speaker 1:I hadn't really thought about that but a lot of times those fees are duplicative to the surcharge because they are being charged to absorb that cost. So I can see why they would say that it is interesting the self-reporting requirement, because ultimately you're reporting to Visa MasterCard that you may not understand all of the rules around surcharging and subject yourself to a secret shopper in a big fine. I would be really interested to see how much money the card brands make off these fines on an annual basis.
Speaker 2:But that's another podcast. Yeah, another story for another day.
Speaker 2:I've got a quick question for you guys, if you don't mind it, because some of this stuff is kind of disheartening you know hearing you both talk about this because it does sound because, because both talk about this, because it does sound, because, because here's why, chris, it seems to me that if a simple answer was offered, I'm going to throw this at you and I take it you're going to tell me, based on what you said already, this is not going to be a compliance. What about a store that literally says you save three percent if you pay with cash on everything in the store? Something as simple as that.
Speaker 1:It sounds like it's not in compliance, but to me that makes sense yeah, and that's fine and you can put that in the store, but they still need to know what the cost of the good or service is. So like because, look, you know, that's like somebody coming to me spending a of money but then telling me how much they saved off that price. So it's a good deal, because it normally would have been this price, but it's really well. I went down the street and found that for a quarter of the good deal that you bought, right, you still need to know the cost, right? I mean, there still needs to be a clear and conspicuous disclosure of the cost of a good. Otherwise, you could walk around saying I saved 3% all day, but really did you? You know what I'm saying.
Speaker 1:Yeah, but, you know, here's part of the problem too. Like, I like these podcasts because it kind of provokes thought. I don't get to have these types of conversations all the time, and one of the thoughts that popped into my mind today is there's this focus on cash, but cash is going away. My mind today is there's this focus on cash, but cash is going away. And so what do we do to replace the idea of cash? Like you know, ach is the cheapest transaction. It's bank account to bank account. It's the most secure because it's bank account to bank account, but yet it's not something that's readily offered at a point of sale, right? Online, yes, like. Physically, no, because people don't carry around their banking information. That's what the debit card is for. But because the debit card has the card brand logo on it, there's a cost associated with the transaction. Right, I mean, at a certain point in time, these are architectural issues with how the industries evolved, the rails, who owns them? Totally, man like, and and it's. It's going to be an interesting look, I look.
Speaker 1:I like the fact that merchants are being given the freedom of of like. I'll give you, for instance, there's a real practical example I have to replace my roof. Right, I got solar part of the. A real practical example I have to replace my roof. Right, I got solar Part of the reason in one area that I have to replace my roof is because the solar company made a hole. I have to have the solar panels removed and reinstalled. Now I can go to the solar company and they will probably do it for me, but then I'm subject to the solar company's schedule and I got a roofer who's got his schedule, and the roofer is way more important. I'm now left with the choice Do I have the roofer do it and pay him and try to get the money back? Take the delay. I have no good choice. Right, like when I look at what's going on, that that choice to me isn't most optimal.
Speaker 1:Right, this is the same thing that we're talking about for consumers or merchants. Right, like? What does a merchant do? Great, I have some freedom of choice. How good are these choices? And do they completely apply to me? And I guess that's the purpose of what I was trying to say with my roofing escapade is, you know, great, consumers are being considered, merchants are being considered, but just because we do something once, I actually applaud California.
Speaker 1:People pushed back, said, this wasn't really practical for us. Can we get this? At least we're having a discussion and negotiation right. In other places not so much. I think the harder part is what do you do if you're a chain store operating in 15 jurisdictions and I think with the, you know, like kind of the unraveling of the federal apparatus around this stuff, you're going to have a lot more disparity. It's going to be interesting. I mean, look, I will tell you this much, we'll be on top of it. You can call us anytime, like we'll help you out with it Definitely. But it's, you know, it's going to be an interesting, an interesting time for a lot of this stuff.
Speaker 3:Yeah, and I actually have a question for you, chris, given that you do litigation as well, are you surprised that you haven't seen many big cases or notes of decision yet regarding this, or is it just too new and you anticipate we will see some cases?
Speaker 1:that frame the path forward, but the only people that really want to take this on. I thought we would see a lot of class action lawsuits around people being noncompliant and surprisingly I have not heard a lot about it, because I thought that there was a lot of low hanging fruit and I guess the question is is it worthwhile for us to, as lawyers, to be going out and trying to harm small business when we all are small business potentially Like? I don't know, maybe lawyers looked at it and said you know, maybe that this really isn't worth my time because there's not a lot of like good associated with this Right and it. Or maybe if you're going after a corporation, that's just, you know, acting the way that they are. But I thought we'd see more of it and I haven't really heard much on it like you, same here.
Speaker 3:So it's definitely interesting that there's not more legal backlash when it comes to this.
Speaker 1:Yeah, I do find it odd, but I do think that this is a hot topic because you know, a lot of people sell on cash discount discount. They sell on surcharging In states that don't have prohibitions or regulation associated with it. On a MasterCard transaction, your cost could be 2.75% and you're allowed to charge four, so it becomes a profit center to a certain degree. I've seen people put in surcharge and then have that eat up all the debit costs, so then they have no costs associated with taking card payment, and the fact that we've got not one size fits all it just leaves the merchant in a really precarious place. I don't know how merchants can be compliant in many respects.
Speaker 3:And one thing I'd like to add on Chris mentioned earlier. You know, one challenge is going to be if you're a let's say, you're a small business and you're operating in multiple jurisdictions, how are you going to? You know, it's just going to be really complicated to make sure you're in compliance. And that came up this morning because we have a client that reached out to us who wants us to review some of his you know the pricing that he has for his goods and I think he's a liquor store owner. So you know he sent us pictures of the labels that they want to use and the receipts. And Chris brought up a good point. You know, because we discussed, you know, next steps in terms of reviewing what he provided. And he brought up a good point saying you know, make sure to let the client know. You know, in this state this is how it operates, but you know, in another state it might operate differently. So the labels you provided us might comply with New York law, but not in another state.
Speaker 1:These are actually POS providers for industry-specific businesses and yeah, it's. You know, I mean it will depend on where the person's located. A lot of our clients that have this as a main issue in their industry, you know they want us to create best practices and create different you know different state issues. We've even like look for automobile dealerships we've been asked about how surcharging is triggered in a transaction that may be covered under truth and lending. I mean, there's a lot of stuff like there's and there will be a lot of pushback from different, uh, industries, but I don't want to say it's confusing as much as it's incongruent.
Speaker 3:That's the problem, right, like there isn't a single rule there's no uniform standard totally, or we can make things a lot easier. Yeah sure.
Speaker 1:And it would. It would be helpful. I mean, it would mean that we probably have less work, but hey, I mean yeah, I mean, but this has been a very interesting way to watch. Card brands aside, states try to adopt rules to really accommodate something that's a market condition, and I find it fascinating to watch how different people look at it, and I'm sure there's just going to be a lot more kind of metamorphosis of this as it continues to grow.
Speaker 2:Well, you know, this was a great conversation, gentlemen, and as we kind of come to the end here, I want to give you guys the last word, of course. What is something? Because it sounds like you know we are able to help, right, we can provide this research, and it sounds like there's going to be a lot of it, state by state. You know, maybe with you, leo, give Chris the last word. What are the questions you're getting most often and maybe what states are being most implicated typically in your research so far?
Speaker 3:Yeah, I mean I'd say the most frequent questions are kind of a lot of what we talked about today, Like what is surcharging? How do you properly implement a surcharging program, Can I surcharge like this? And they show us examples of how they're doing it. And then we review and we go really in depth. We review all the documents clients provide us all the labels, receipts and really get down to a granular level. So I think there's no one question that's most frequent. I think it's just a lot of questions around this topic.
Speaker 3:And I would say you know, as Jeremy mentioned, I'm a transactional attorney at the firm, Chris is as well, and we really go deep on the compliance aspect of this issue. So if you're a merchant who's thinking of implementing surcharging, I would suggest don't go doing this on your own without really having a legal professional review your documentation. Reach out to us. We will go through every piece of paperwork that you give us the labeling, the receipts, ask you how you're planning to implement it, what states you're planning to implement the program, and kind of get you. We'll give you our white papers on the on the issue. We constantly update documentation that is in line with industry trends and the evolving landscape in terms of this. What was the second question you asked the states that are most.
Speaker 2:Yeah, what states are kind of most implicated?
Speaker 3:I mean, California and New York. Those are the big ones. I anticipate we're going to see a lot more from Minnesota.
Speaker 1:I think we'll see places where there's consumer protection. Illinois is a consumer protection state. Washington's a consumer protection state. I think we'll start to see all of these things. Washington's a consumer protection state. I think we'll start to see all of these things. I think it depends on how big of an issue it becomes locally and how much local response and I say local I mean by state Like local response there will be how much commerce the state has.
Speaker 1:I'm sure Wyoming this isn't a big topic, but I just think it's going to depend. But I I agree with Leo, but I think even more so on or less so, on the merchant level. Look, if you're an industry participant and you're in between the merchants and the payment processors and you're out there and you're selling and you want a value add to your sales process, learning as much about this subject matter on the level that we learn it is probably important and I would suggest that, if you want to, you know get a, you know, have a conversation with us, figure out how you're operating, where you're touching merchants. You know how you can build out even a sales pitch associated with it or documentation on best practices to truly be a resource for the merchant to help them with their business. Call us.
Speaker 3:Yeah, because you don't want to have a process built out that's not compliant and then have to come to us and we have to redo everything. I think it's better to start from the beginning, get it all down, make sure you're in compliance from the get-go and then go out there and market what you're marketing.
Speaker 1:Yeah, I mean it can be a tool that could really help close conversions with merchants Awesome.
Speaker 2:This has been the Payments Experts Podcast, a podcast of global legal law firm. Thank you so much for listening this long. See you in the next one. I'm going Nice, are you?
Speaker 3:going to leave me hanging man, yeah.
Speaker 2:Thank you for listening to this episode of the Payments Experts Podcast, a podcast of Global Legal Law Firm. Visit us online today at globallegallawfirmcom.