Visa Intensifies Enforcement on Merchant Surcharges

Visa, the leading credit card network in the United States, is set to ramp up enforcement on merchants imposing surcharges on credit card transactions, according to a recent memo from a payments processor under Priority Technology Holdings. The memo, dated December 2023, alerted independent sales vendors that their non-compliant merchant clients could face fines ranging from $50,000 to $1 million.

This move by Visa reflects the ongoing struggle over interchange fees, commonly known as swipe fees, with the credit card giant asserting its right to increase fees while merchants strive to maintain control. Surcharges enter the picture as a means for merchants to offset interchange costs by passing them on to customers who opt for credit card payments.

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Visa's CEO, Ryan McInerney, expressed the company's disapproval of such surcharges, citing concerns about the impact on customer experience. However, he acknowledged that it remains within the merchants' discretion to implement surcharges, as long as they adhere to the company's rules regarding additional charges.

The memo from the Priority Payment Systems unit, responsible for processing credit card payments in collaboration with independent sales organizations, emphasized Visa's heightened commitment to enforcing surcharge rules. It urged merchants to conduct thorough reviews of existing and new surcharge programs to avoid potential fines from card brands due to non-compliance.

The broader battle over interchange fees and surcharges is unfolding not only in the corporate arena but also in government circles. A bipartisan effort in Congress aims to pass the Credit Card Competition Act, seeking to provide merchants with alternatives to Visa and Mastercard. However, trade groups representing card issuers and networks oppose the legislation, arguing that fees contribute to essential features such as security.

At the state level, New Jersey and New York have recently enacted laws restricting surcharges, capping them at the costs merchants incur for transaction processing. In this complex landscape, a new lawsuit filed in December 2023 adds another layer of contention. MiCamp Solutions, a processor based in Scottsdale, Arizona, alleges that Visa attempts to “obscure the extent of its interchange fees” and “to deter ISOs from presenting their programs by enforcing penalties tied to ambiguously formulated regulations.” 

Priority Technology Holdings, the parent company of the payments processor issuing the December memo, has 820,000 active customers across various payment channels, processing approximately $118 billion annually.

The battle over interchange fees continues to shape the financial landscape, prompting legislative actions, legal battles, and increased scrutiny from major credit card networks. As Visa tightens its grip on surcharge enforcement, the ongoing clash between merchants and card networks shows no signs of abating.