New Jersey Gov. Phil Murphy enacted a law last week that requires merchants in the state to limit a surcharge on credit card transactions to the cost they bear in processing the payment.
The Democrat signed the bill into law Friday to prohibit sellers from imposing overly burdensome fees on consumers, and to require that they post notices about any such surcharges, according to an Aug. 18 press release from his office.
“All residents and visitors doing business in New Jersey deserve the utmost transparency with respect to their transactions, especially given the affordability challenges experienced by our low- and moderate-income families,” Murphy said in the release. “Today’s legislation marks yet another step New Jersey is taking to ease those pressures and put well-earned money back in the pockets of hardworking New Jerseyans.”
The new law will let the state take action against merchants that use the surcharges to “make a profit,” the acting director of the state’s division of consumer affairs, Cari Fais, said in the release.
The New Jersey bill, backed mainly by Democrats, passed both houses of the legislature on June 30, according to the state’s legislative website.
Average interchange fees imposed by Visa and Mastercard for card transactions in 2021 were 2.22%, according to a report last year from card industry research firm the Nilson Report, but that average likely edged up last year following increases for some cards.
New Jersey Democrat Sen. Gordon Johnson, who co-sponsored the legislation, said last month in an interview that it seemed like “a pretty straightforward bill” aimed at “trying to protect the consumer.” He backed the bill after Assemblyman Paul Moriarty, another Democratic co-sponsor, asked for his support of the legislation.
For his part, Moriarty made a similar point in the governor’s press release Friday. "No one likes to be hit with a surprise credit card fee, which can be stressful and expensive," Moriarty said. "Now consumers will learn about credit card surcharges before they complete a transaction, which will help them make an informed decision about choosing their method of payment."
New Jersey’s move comes as more restaurants and retailers nationwide seek to add a surcharge to tabs to help pay for interchange fees imposed by card network companies, mainly industry heavyweights Visa and Mastercard. When surcharges are imposed, they also often include additional fees imposed by vendors that sell the merchants various card processing hardware or services.
Third-party vendors who provide some of those services that stand between merchants and card networks have already been in an uproar this year over card network giant Visa’s efforts to cap surcharges at 3% and to impose fines on those who don’t comply.
Some payments professionals have noted that the New Jersey legislation doesn’t do much beyond echoing the rules that Visa and its chief rival Mastercard, already have in place prohibiting fees from exceeding merchants' costs of processing the payment. For the first time last month, Visa’s CEO articulated the company’s thinking about surcharges, calling them “not a great customer experience.”
Other states in recent years have moved to eliminate bans on surcharges, but it remains to be seen whether states will follow New Jersey in enacting laws that cap the surcharges.