Sunday, October 16, 2011

Credit Card Processing Loophole In CA

Credit Card Processing Loophole In California

credit card processingRecently we discussed how Anthem Blue Cross in California cannot charge the $15 convenience fee to accept credit cards from policy holders to pay their premiums.  It is a violation of California law for private businesses to charge credit card processing fees to their customers to accept credit cards instead of cash.  The can discount amounts if a someone uses cash or check but cannot make it more expensive to use credit.
They attempt to do this to make up for lost revenue for the merchant account fees they must endure for providing the ability to accept credit cards as a form of payment.  In the past it was something that companies were willing to write off but in tough economic times it doesn’t sit so well.  In Anthem’s case they tried to charge what they call a “convenience fee” and it was a miserable failure.  They were negligent with their attempts to inform policy holders and many on autopay plans ending up $15 short on their premiums and lost coverage.
The fee has been done away with but many wonder how Anthem could get away with this in California and the truth is they cannot.  But others can.  There is definitely a credit card processing loophole in the State and here it is.  Private companies cannot charge a premium for credit card users but public ones can.  A college like UCLA, for instance, charges a 2.75% fee for allowing students and parents to pay with a credit card.  Certain counties are charging an extra fee for Credit Card Processing on property taxes and California utilities companies can also charge for the convenience.
In the broadest sense of the word none of the above are considered retailers by State Law and therefor exempt for laws governing retailer’s charging above the price the credit card processing.  Utilities are not, however, allowed to collect any more than the actual cost of their actual merchant costs due to tougher regulations but others can.  UCLA says it spends over $6.5million in merchant account fees and now by passing them on to students, they save that money.  It is unclear whether UCLA is profiting by charging a flat 2.75% fee.
For most of us, the best example of two tier pricing is at the gas pumps but the standard party line on this from the oil industry is that they are offering a discount for cash or check and this discount is offered to all customers.  If they admitted to raising the price for credit this would be against California’s credit card processing laws.