When customers use credit cards, it costs retailers money, and some businesses have started charging customers additional fees to help offset that expense.
While it is almost unheard of to charge someone for using a debit card, Weaver Enterprises Ltd., which operates more than 20 Kentucky Fried Chicken restaurants, including the one in Newton, has begun doing just that.
Iowa Director of Consumer Protection Division Bill Brauch said there is no specific law regulating additional charges for credit card use, but a private lawsuit between banks and retailers settled the issue for credit cards.
“Retailers are allowed to charge additionally for credit cards, but not debit cards, by a (maximum) of 4 percent,” Brauch said.
The lawsuit was settled last year, and although the settlement allowed merchants to charge a maximum surcharge of 4 percent per transaction, many local retailers have refused to charge additionally for their products.
“We don’t do that,” Worth the Weight co-owner Larry Thompson said. “When I heard that (merchants being allowed to have a surcharge of up to 4 percent), I thought, ‘Are you kidding me?’ I thought it would hurt our customers.”
“That’s ridiculous,” Pappy’s Antique Mall clerk Karren Bleakney said.
Ten states have made credit card surcharges illegal: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
Other states already have used the ruling to increase profits. In Michigan, gas stations usually charge an additional 10 cents per gallon if a customer pays for gas by credit card. Brauch said a surcharge of a debit card would violate an agreement with the previous lawsuit.
“Retailers enter into an agreement with major credit card companies to accept their cards,” he said. “What the recent settlement says is it only allows the surcharge to be applied to credit cards. It doesn’t apply to debit cards.”
He also said he believes Visa or Mastercard has the right to take the company to court because it violated their settlement agreement.
“For example, Visa says in its contract, retailers cannot charge a customer for using a Visa Debit Card, but if it’s a Visa Credit Card, you can charge for it,” Brauch said.
Brauch said it is was legal for stores to surcharge for credit card use, but only if it told customers beforehand.
“In the agreement, if they are not disclosing information about the fee, it violates the Iowa Consumer Fraud Law,” Brauch said. “They have to tell people in advance.”
When contacted, the Newton KFC/TacoBell said a “new regulation” allowed it to charge for debit card payments. It waives the fee for credit card transactions.
Another KFC/Taco Bell owned by Weaver Enterprises in Muscatine said it began charging the fee for debit transactions at the first of the year, it also alluded to “a new regulation” that allowed the practice.
“That settlement doesn’t permit retailers to charge for debit regardless if it is run as credit or debit,” Brauch said. “If any retailer says there is a new law allowing them to charge additional for a debit, they are wrong.”
Brauch said because of the settlement, credit card companies have posted guidelines on their website for companies interested in accepting their credit cards.
The Daily News made several attempts to contact Weaver Enterprises, but they were not available to comment.
Anyone charged a surcharge for a debit card transaction is encouraged to call The Consumer Protection Division at 1-888-777-4590 or email consumer@iowa.gov.
Staff writer Matthew Shepard may be contacted at (641) 792-3121, ext. 425, or at mshepard@newtondailynews.com.