• September 23, 2021
 Victor Urbina’s Minding Your Business: Are You Breaking the Law?

Sales Assistant With Credit Card Reader On Digital Tablet / Photo adobe stock

Victor Urbina’s Minding Your Business: Are You Breaking the Law?

I just got ripped off! Chances are you have too and don’t even know it. It happens every day. Most of the time the people ripping us off don’t even know they’re doing it. But that doesn’t mean it doesn’t suck.

What in the world am I talking about? Pull up a chair and let me tell you.

I walked into a local hobby shop the other day attracted by something I saw in the window. As I walked around I noticed how many different types of cool items this place had. They had things for the beginner all the way down to the “hardcore” collector. It was awesome!

I looked around for a couple of minutes and picked out a couple of small things to buy. When I went up to pay I asked the owner, who was behind the counter, if they took special orders. The guy said, “All the time, that wouldn’t be a problem.” I smiled and said great then handed him my credit card.

That’s when we hit a REAL problem.

The owner told me there was a 2% surcharge on my purchase because I wasn’t paying cash. He was charging me a “swipe fee.” He told me it was to recoup what the processing company charges him. I rolled my eyes and said, “fine.” But it left a bad taste in my mouth. It seemed petty. Let me tell you why.

Everyone who is in business knows that there are certain “costs-of- doing-business.” Things you can’t avoid. Things like paying more for your internet access. Landlord CAM fees. And credit or debit card processing fees. These are all expenses that need you need to consider when pricing what you sell.

What annoys me is when a business tells me that they’re charging me extra because of how I choose to pay. Why not just build it into your pricing? This way it doesn’t come across like you’re nickel-and-diming me. It’s bad for business because it makes me feel like I’m getting ripped off. And I recently found out I actually was. Let me tell you what I’m talking about.

I was reading a story in the Wall Street Journal about credit card fees squeezing retail profits. Because I own a retail businesses I have first-hand experience with these fees. They’re too high and can be in the thousands every month, but I digress. The article mentioned an interesting practice some businesses have adopted to cut the fees.

They’re passing on the expense to their customers as a surcharge, a “swipe fee.”

When I read this my antenna immediately started spinning at high-speed. My experience at the hobby shop was still fresh on my mind so I continued reading. That’s when I made an amazing discovery.

The article mentioned that “swipe fees” are illegal in some states including Texas. I couldn’t believe it.

I hopped on Google and typed “Is it legal to charge a surcharge for using a credit card in Texas” to make sure – 0.73 seconds later I had my answer.

The Texas Office of Consumer Credit Commissioner says it is illegal to charge a surcharge on credit and debit transactions. Here’s what they say verbatim.

“The Texas Finance Code prohibits sellers of goods and services from imposing a credit card surcharge. This means that a seller is not allowed to add an extra amount to the regular price of a good or service when the buyer pays by credit card, as opposed to some other payment method. Texas law also prohibits debit card surcharges.”

Armed with this knowledge I decided I had to share it with everyone that I knew. Not just because I don’t want others to be illegally charged. But also to prevent business owners who are charging a surcharge from getting fined or sued. Here’s why.

My guess is if you get into trouble because you violated Section 339.001 of the Texas Finance Code (that’s the law I mentioned above) the state is going to fine you AND make you reimburse EVERYONE you charged illegally. If your business has been doing this for years those surcharges can add up to tens of thousands of dollars.

Can your business pay $30, $20 or even $10-thousand PLUS a fine all at once? I know it would set me back quite a bit, but I’m not alone. Most business just aren’t that liquid. Some would have to shut down and declare bankruptcy.

WARNING, I’m not an attorney so please don’t take this as legal counsel. Every business is DIFFERENT, therefore every business owner should consult with their attorney. Until you can do that, the safest thing to do is stop the “swipe fees.”

Look, I hate having to pay those credit card processing fees at my business as much as anyone else. But they’re just a cost-of- doing-business. The surcharges are ticky-tack and they piss off customers, so don’t do it. There’s other ways to recoup these expenses. If want to learn more about them go to the Texas Office of Consumer Credit Commissioner site.

OK, I’ll get off my soapbox now. As I said I just HAD to share this with everyone. I would hate to see someone lose everything because they didn’t know.

Remember, “Life is a series of missed opportunities so go for yours.”™


Author: Victor Urbina

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  • It is illegal in 10 states and Texas is ONE of them.

    • Technically 9 states at the moment. California ruled the ban on surcharging unconstitutional, and while the Attorney General is appealing that, surcharges are currently allowed in California.

      Additionally, the Supreme Court recently agreed to hear a case regarding surcharges in New York. It’s possible that could have repercussions for other states who ban surcharging.

  • Yes, it’s correct that surcharging is prohibited by state law in a number of locations. However, even when it’s allowed, there are still rules that must be followed. This article and infographic gives more detail on when and where surcharges are applicable.


    • True there are some rules, I just didn’t want to dive into them here. Any other thoughts on the piece?

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