A new state law in Louisiana prohibits merchants from adding surcharges to debit card transactions. However, critics argue that this ban actually benefits the banks and credit card companies that created these fees.

Background

Supporters of Act 751, which took effect on August 1, have promoted the measure as a consumer protection law that bars merchants from imposing surcharges specifically on debit card transactions. This law does not apply to credit cards, for which retailers can still add a fee to each customer purchase.

The legislation stops retail businesses from passing the costs of debit transactions onto customers in the form of surcharges, but it doesn’t actually get rid of the debit card fees themselves, which originate from banks and payment networks such as Visa and Mastercard.

Impact on Businesses

Instead, the law cracks down specifically on retail businesses, which often have little control over the fees, while leaving untouched the financial institutions charging the businesses every time a card is swiped. State Rep. Nicholas Muscarello, a lawyer and co-owner of a convenience store, pays about $2,500 per month in debit and credit card fees.

Some business owners have opted to raise their prices across-the-board rather than try to parse through the complex web of financial regulations to figure out when they’re allowed to place a card surcharge on a bill. New Orleans restaurateur Conrad Churra said, “So it’s another cost that we’ve just factored into our overall price, which is why it costs $18 for a sandwich right now.”

The financial institutions benefit from both options, but since the card fees are a percentage of the final bill, Churra’s method of raising his menu prices also generates more fees for the card companies.

Enforcement and Next Steps

The law creates ways for consumers and state officials to go after merchants that add surcharges to debit card purchases. Customers now have the right to file a lawsuit against a business for repeated violations, and the Louisiana attorney general has authority to enforce the new ban through civil penalties.

Muscarello and another state representative plan to work on legislation next year to address the underlying issues of card fees in a way that protects the consumers and businesses paying them.

Original reporting: KTBS 3 (Shreveport) — read the source article.