New Colorado Surcharging Law
Colorado used to be one of a few states that banned surcharging, but that all changed on July 9, 2021. On July 9th, Colorado’s governor, Jared Polis, signed a new law that makes surcharging permittable in Colorado. The revised statute will take place on July 1, 2022, and will allow Colorado merchants to add fees to transactions when a customer pays with a credit card or a charge card. The new Colorado surcharging rules include:
1. Every Charge Is A Surcharge
Usually, card brands dictate how surcharging programs are utilized. But, with this new Colorado surcharging law, there won’t be a difference between convenience fees, service fees, and surcharges. Instead, every charge will be a surcharge. With this new statute in place, a surcharge is defined as, ” any additional amount imposed at the time of the sale or lease transaction…for the privelege of using a credit or charge card.” So, what does this mean exactly? It means that every charge that’s added to your credit card or charge card in Colorado is subject to the new surcharging law.
2. Surcharges Are Limited
As a customer, the good news is that there’s a limit to surcharges in Colorado. With the new law, merchants can choose between two surcharging structures: 1. The surcharge is 2 percent of the transaction value, or 2. The surcharge is the amount the merchant has to pay to their payment processor. However, Visa and MasterCard have their own rules which limits surcharging to the lesser amount of either the merchant discount rate or 4 percent. This could create unique surcharging situations because the new Colorado surcharging law and card brand rules could differ.
3. Surcharging Cannot Be Applied To Debit Cards
If you complete a transaction with a debit card, gift card, cash, or check, then the merchant cannot add any fees. Even if a card brand rules allow surcharging on a debit card, the new Colorado law makes it illegal to add fees to debit card transactions.
4. There Are Specific Signage And Receipt Disclosures
Under Colorado’s new statute, merchants are required to disclose the surcharge using a specific language. The surcharge must also be broken down on the receipt with a separate line item, and only one surcharge may be applied per transaction.
5. Illegal Conduct Is Subject To Criminal Prosecution
The new surcharging statute in Colorado is a part of the Consumer Credit Code. This means that any merchant who violates the surcharging law is subject to liability as a creditor. One of the harshest penalties for violating the Consumer Credit Code is facing prosecution for a misdemeanor.
PayFrog Is Here To Help You Understand Credit Card Surcharging in Colorado
Even though this new law permits merchants to surcharge transactions completed with a credit card, it’s still extremely important to be cognisant of extra fees being applied to you. There are certain surcharging limitations and it’s important to make sure that merchants understand these laws and aren’t wrongfully surcharging your purchases. As a member of the Better Business Bureau, we highly value transparency and truthful education with our clients. You deserve to understand what fees are legally allowed to be passed to cardholders and how to spot an unlawful company performing unethical credit card surcharging in Colorado. Does your current processor educate you and treat you like we do? Please feel free to visit our blog page to learn more or post your story in the comments section below!