Prohibits payment card networks from assessing penalties against small businesses or financial intermediaries who fail to comply with the credit card surcharge notice requirement; declares any clause of a contract, agreement, or arrangement in violation of such provision void.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6541
SPONSOR: Mamdani TITLE OF BILL:
An act to amend the general business law, in relation to prohibiting
payment card networks from assessing penalties against small businesses
or financial intermediaries who fail to comply with the credit card
surcharge notice requirement
PURPOSE:
To prohibit a redundant enforcement mechanism for credit card surcharge
labeling requirements. SUMMARY OF SPECIFIC PROVISIONS:
Section 1 provides the definition of "payment card network."
Section 2 amends section 518 of the general business law to prohibit
payment card networks from assessing penalties against any small busi-
ness or financial intermediaries for violating the credit card surcharge
notification requirement.
Section 3 sets an immediate effective date.
JUSTIFICATION:
Every credit card transaction requires merchants to pay swipe fees to
the bank issuing the card and the payment card network, usually between
rates of 2 to 4 percent of each credit card transaction. All told, card
networks and banks collect over $100 billion each year in swipe fees
from merchants. Some small businesses report that swipe fees represent
the third biggest expense, behind only payroll and rent (2).
Merchants are technically able to pass on the surcharge to customers
through the price of goods. Nationwide, American families pay roughly
$1,100 in swipe fees per year, which is nine times higher than EU resi-
dents and twice as high as Canadian residents (1). In New York State,
merchants must follow strict labeling requirements in order to pass on
the swipe fee to customers. Items must either be labeled inclusive of
the credit card surcharge, or merchants must list two prices for each
item, posting the credit card price alongside the cash price. A sign at
the store's entrance announcing a 4% surcharge on credit card trans-
actions is not sufficient, according to state law. Complying with this
directive is difficult for many small businesses considering the number
of products to label, fluctuations in the payment card surcharge, and
confusion caused by Manufacturer's Suggested Retail Prices (MSRP)
labels.
In 2023, state law amended § 518 of the general business law to clarify
that enforcement of the credit card surcharge notification requirement
may be carried out by a municipal consumer affairs office, a town attor-
ney, city corporation counsel, or other lawful designee of a munici-
pality or local government, and that these entities may impose a civil
penalty of up to $500 per violation.
Payment card networks have begun a parallel system of enforcement for
this section of law. They send "secret shoppers" to target small busi-
nesses like bodegas and delis in urban areas to purchase low-cost items
and search for minor discrepancies in pricing displays. By taking photos
of single items among thousands that lack proper dual pricing, secret
shoppers build cases that result in disproportionate fines. Payment card
networks have charged more than $100,000 to small business owners across
New York as a fine for failing to adhere to the state's credit card
surcharge labeling requirements. Small businesses like bodegas, delis,
pizzerias, and salons should operate in accordance with the law and
should also be protected from duplicative enforcement.
This legislation would prohibit payment card networks from assessing
fees on intermediary banks or small businesses that do not comply with
the credit card surcharge labeling requirement. This bill will ensure
that payment card networks and intermediary banks cannot charge
merchants for violation of this section and that enforcement for this
remains solely with local governments.
(1) Senate Hearing on Credit Card Competition, Nov 19, 2024
(2)
https://www.nytimes.com/2024/11/30/business/swipe-fees-merchants.html
PRIOR LEGISLATIVE HISTORY:
2025: New Bill
FISCAL IMPLICATIONS:
No fiscal impact on the state or municipalities.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6541
2025-2026 Regular Sessions
IN ASSEMBLY
March 5, 2025
___________
Introduced by M. of A. MAMDANI -- read once and referred to the Commit-
tee on Consumer Affairs and Protection
AN ACT to amend the general business law, in relation to prohibiting
payment card networks from assessing penalties against small busi-
nesses or financial intermediaries who fail to comply with the credit
card surcharge notice requirement
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 511 of the general business law is amended by
2 adding a new subdivision 11 to read as follows:
3 11. "Payment card network" means an entity that directly, or through
4 licensed members, processors, or agents, provides the proprietary
5 services, infrastructure, and software that route information and data
6 to conduct debit card or credit card transaction authorization, clear-
7 ance, and settlement, and that a person uses in order to accept as a
8 form of payment a brand of debit card, credit card or other device that
9 may be used to carry out debit or credit transactions.
10 § 2. Section 518 of the general business law is amended by adding a
11 new subdivision 3 to read as follows:
12 3. No payment card network or any subdivision thereof doing business
13 in the state of New York shall assess penalties against any small busi-
14 ness or any financial intermediary for violating the provisions of this
15 section. Any clause or portion of a contract, agreement, or arrangement
16 that would assess penalties against a small business or financial inter-
17 mediary in violation of this subdivision shall be automatically void.
18 For the purposes of this subdivision, "small business" shall have the
19 same meaning as defined in section one hundred thirty-one of the econom-
20 ic development law.
21 § 3. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04388-01-5
