Starting today, retailers could potentially add up to a 4 percent surcharge to every purchase made with a credit card, according to Consumer World, an online guide run by a former assistant attorney general in Massachusetts.
Historically, merchants have been prohibited from credit-card surcharges because of a ban on the practice contained in contracts that banks and credit-card companies have with sellers. But according to Edgar Dworsky, founder of ConsumerWorld.org, that changed in November when a federal judge approved a settlement in an anti-trust case.
Part of the settlement, eliminating the ban on surcharges, goes into effect today, Jan. 27.
Surcharges are not expected immediately but consumer advocates worry that over time, they could become common.
“This outrageous, new fee should make every shopper think twice before plunking down a credit card,” Dworsky said. “If a national sales tax of 2, 3 or 4 percent were being proposed, everyone would be up in arms. Yet, nearly the equivalent of that — an up to 4 percent credit-card surcharge pushed by retailers — has flown under the radar with seemingly little scrutiny, criticism or concern ... ’’
Under the new rules:
• Sellers will only be allowed the extra charges for the actual costs of processing credit-card transactions (typically 1.5 to 3 percent) or 4 percent, whichever is less.
• Complicated rules allow retailers to choose the cards where a surcharge will apply. American Express says while its agreements allow surcharges, a clever provision will likely mean no surcharges can be applied to AMEX cards.
• Debit cards and prepaid cards will not be subject to a surcharge. (On this point, it is worth noting that debit cards might have similar fraud protections to credit cards. If fraud occurs, your money is taken out immediately from your account and it will take longer to get it back.
ConsumerWorld says shoppers who switch to debit cards give up an important federal protection if the purchase involves defective merchandise or is never received. And those with premium credit cards could lose valuable benefits such as a double manufacturer’s warranty, collision damage on rental cars or points/miles/cash back.)
• Brick-and-mortar retailers will have to post a notice at the store’s entrance advising customers that a surcharge applies on purchases made with a credit card. However, only at the point of sale, must there be a disclosure of the exact percentage. The receipt must also itemize it.
• Online retailers only have to disclose that a surcharge will be imposed on the page where credit cards are first mentioned.
• Some states (not Ohio) have laws prohibiting or restricting credit-card surcharges.
Dworsky said he hopes more states will pass legislation to ban credit-card surcharges and that the Consumer Financial Protection Bureau will consider regulations to head off possible abuse.
The Better Business Bureau of Canton and Greater West Virginia is warning the public to be careful of letters that seem to be from Publishers Clearing House and claim the recipient has won a grand prize of $2 million or more.
“Not only are letters popping up in mailboxes, but some people report receiving phone calls from individuals pretending to be from Publishers Clearing House as well,” the bureau said.
Here’s how the scam works: The letters have the official logo of the sweepstakes and claim the recipient has won over $2 million dollars and instruct consumers to immediately contact a claims agent.
Some letters also include a check for as much as $5,900 with instructions to call a claims agent. To receive the prize, the consumer is instructed to cash the check and wire a portion of that, up to $4,000, to PCH. The check is fraudulent and any money sent by wire transfer cannot be recovered. Victims also might face penalties to their bank.
Other fake PCH offers come by phone or email and claim funds are needed in advance to pay for insurance before winnings can be received.
In this instance, consumers are instructed to put at least $400 on a Green Dot Money Pak Card from their local Walmart or Walgreens, for example, and give the money card number to the “official” claims agent before winnings will be delivered.
The BBB suggests:
• Look up the PCH phone number yourself and give it a call. The phone number for Publishers Clearing House, according to its website, is 800-392-4190. The Canton BBB is 330-454-9401, the Akron BBB number is 330-253-4590 or 800-825-8887.
• PCH will never send out winning notices by email or phone calls. It notifies winners by mail or in person.
• Businesses in Alabama, California, Kansas and West Virginia discovered that their checks — which included their name, address and account number — were reproduced as part of this fraud in the past.