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AG Kilmartin Urges Passage of Credit Card Surcharge Prohibition Legislation

Citing the legislation as an important consumer protection, Attorney General Peter F. Kilmartin today announced his support for 2014 H7007, "An Act Relating to Commercial Law – General Regulatory Provisions – Surcharges on Credit Card Transactions," sponsored by Representative John J. Lombardi. If passed, the legislation would prohibit retailers from imposing a surcharge on any consumer who uses a credit card in a transaction in lieu of cash or check. The legislation would not prohibit retailers from providing a discount for those who use cash or checks in transactions (i.e. gas stations).

The legislation is scheduled for a hearing this afternoon before House Committee on Corporations.

As a result of a settlement in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation (No. 05-MDL 1720), which occurred in United States District Court of the Eastern District of New York in November 2012, restrictions were removed that prevented retailers from passing on credit card processing fees to consumers. As a result, on January 27, 2013, retailers were allowed to impose a four percent surcharge on transactions that are paid by a credit card. Nine states have statutes that prohibit such practice and these statutes were in effect before the settlement occurred, including to Connecticut and Massachusetts. Utah passed a prohibition last year.

"Credit card fees are big business for Visa and MasterCard. Rhode Island consumers should not be penalized with a four percent surcharge simply for paying with credit cards. It is imperative that we take steps to protect our consumers from that possibility," said Attorney General Kilmartin in his letter of support to the House Committee on Corporations, which is scheduled to hear the bill this afternoon. "Moreover, we have collectively worked to improve the business climate in Rhode Island and make the state competitive with its neighbors. In this instance, combined with lower sales tax and a prohibition on such credit card surcharges, Connecticut and Massachusetts retailers have a big advantage in attracting consumers from Rhode Island. Passage of this Act would help level the playing field and protect consumers from unnecessary and costly fees."

Attorney General Kilmartin proposed an amendment to the legislation that would make the penalty a civil violation, versus a criminal penalty, with increased fines for those who violate the Act.

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