Just as credit card holders begin mending the wounds of their holiday purchases, they could be sideswiped by a new fee.
The consumer advocacy group Consumer Action is urging people to be on alert for so-called checkout fees that some retailers could begin to impose on credit card transactions starting Jan. 27.
Merchant trade groups contend most retailers, fearing customer backlash, will not charge the fee. But Consumer Action wants cardholders to be aware of the possibility and options for fighting back.
"We're not sure whether retailers are going to charge these fees," said Ruth Susswein, deputy director of national priorities at Consumer Action in Washington, D.C. "They may not for competitive reasons. Some of it will depend on whether the other guy does it."
She noted that the practice is banned in 10 states, including California, Florida and New York. There is no such ban in Pennsylvania.
Consumers who encounter the fees should voice their displeasure, which may persuade merchants to drop them, Ms. Susswein said.
Merchants won the right to charge the fees under a class action settlement with Visa, MasterCard and big banks reached last summer and tentatively approved by a judge in November.
The fee allows merchants to recoup the swipe fees they pay to process credit card transactions, which typically range between 1.5 percent and 3 percent of the purchase amount. Checkout fees are capped at 4 percent, meaning a cardholder buying $100 in merchandise could face up to a $4 surcharge.
Visa and the other defendants also agreed to pay merchants just over $6 billion and temporarily reduce swipe fees to settle allegations that they engaged in anti-competitive practices and price fixing when processing credit card payments.
To avoid blindsiding customers, merchants that impose checkout fees must disclose the surcharge at store entrances, at the register and on customer receipts. Online businesses must put a notice on their homepage.
Checkout fees don't apply to debit card transactions, whose swipe fees were reduced by the federal government in 2011.
Ms. Susswein emphasized that credit card holders could be charged different checkout fees depending on which card they use. For example, customers with reward cards could be charged more because they typically cost merchants more to process.
Before the class action settlement, Visa and MasterCard had prohibited retailers from surcharging customers who use credit cards. They also had barred merchants from offering discounts for cash purchases, but that prohibition was lifted in 2011 under a settlement with the U.S. Justice Department. (Some businesses had side deals with Visa and MasterCard allowing cash discounts even before that settlement.)
Although a judge gave the class action settlement preliminary approval, some major retailers involved in the case aren't happy with the deal and are pushing hard to get it scuttled, saying it does not fundamentally alter the anti-competitive swipe fee structure.
"An overwhelming portion of the retail community [including plaintiffs in the case] oppose the settlement and are committed to fighting its final OK," Retail Industry Leaders Association spokesman Brian Dodge said in an email.
As for checkout fees, he said, "Retailers don't want to surcharge customers, and I know of none that intend to."
Meanwhile, Visa and MasterCard have said they are making preparations for checkout fees, including changing back-office systems to handle the record keeping.
Terms of the class action settlement take effect 60 days after preliminary approval. That will give retailers the option of charging checkout fees starting the end of this month even though the deal hasn't received final court approval.
For more on checkout fees visit www.consumer-action.org.businessnews
Patricia Sabatini: firstname.lastname@example.org or 412-263-3066.