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The Vermont Legislature has passed a bill cracking down on fees and other costs that credit card companies charge merchants, offering protections to small mom-and-pop stores who say the fees stand to threaten their livelihood.
The bill, which passed the Vermont Senate unanimously on Tuesday night and now goes to the governor, allows merchants to set a minimum amount for credit card purchases with a sign notifying customers without facing fines from credit card companies. Credit card companies also would be prohibited from fining stores that offer discounts to customers who use a credit card with fewer fees placed on the merchant and from forcing a retailer to accept their credit card at all store locations, if they don't want to.
"Almost every Vermont family or store owner has a story to tell about one of the major credit card companies charging them exorbitant and unfair fees or leveraging unjust fines," Senate President Peter Shumlin, a Democrat running for governor, said Wednesday. "This legislation will help the Vermont consumer and store owner by prohibiting these abusive practices."
Credit card companies face civil penalties of $10,000 for violations.
The bill, parts of which would go into effect in July, was an attempt to address the market power of the credit card companies, said Tasha Wallis, executive director of the Vermont Retail Association, which supports the bill. "Visa and MasterCard have an over 80 percent market share and, so, basically they have been able to tell retailers what all rules are going to be in accepting credit cards. And for small purchases, many retailers can lose money on those purchases."
But a spokesman for MasterCard said allowing merchants to set a $10 minimum for credit and debit card purchases, might force consumers to spend more than they planned to.
"The legislation would restrict consumer choice, and allow merchants to circumvent MasterCard rules that prevent consumers from being penalized for preferring to use an electronic payment card," said MasterCard in a written statement.
Banking officials said they were unclear if the state had the authority to weigh in on the contract rules of an electronic payment system.
"I don't know of other states that have done this. We will have to wait and see," said Tom Candon, deputy commissioner of the state Department of Banking, Insurance, Securities and Health Care Administration.
The bill also cracks down on the use of credit card skimming devices or reencoders, used to defraud by scanning information from a debit or credit card while in use without permission. Anyone found to use one faces up to 10 years in prison or a maximum $10,000 fine.