MEGA UPDATE: Requiring Minimum Credit Card Purchases is a Violation

Erik went ahead and consolidated the merchant policies of Discover, Mastercard and Visa, which leads to a startling conclusion.

All of them explicitly prohibit requiring minimum credit card charges.

So then, you should be able to buy that pack of gum, or cup of joe with a credit card if you want to. And if a store makes you pay a minimum charge, you can often write them up.

What’s a small business to do? Well, as Digg reader Steger suggests, they can raise the prices and offer cash customers a discount.

After the jump, a compendium of the rules, taken directly from the contracts the merchants signed with the credit card companies…

DISCOVER NETWORK

A. As per page four (4) of The “Merchant Operating Regulations,” incorporated into the “Merchant Services Agreement” as Exhibit A, expressly prohibits the following merchant conduct:

3.0 GENERAL REQUIREMENTS

3.1 Surcharges
Unless otherwise agreed upon by us in writing, you may not impose any surcharge, levy or fee of any kind for any transaction where a Cardmember desires to use a Card for any purchase of goods and services.

3.6 Minimum/Maximum Dollar Limits and Other Limits
You may not require that any Cardmember make a minimum dollar purchase in order to use a Card and, other than when we have not authorized a Cardmember’s transaction, you may not limit the maximum amount that a Cardmember may spend when using a Card.

3.7 Equal Treatment of Card Sales versus other Cards
You may not institute or adopt any practice that discriminates or provides unequal treatment for users of a Card versus any other card products that you accept.

MASTERCARD INTERNATIONAL INCORPORATED

A. As per pages two-twenty one (2-21) through two-twenty two (2-22) of the “Merchant Rules Manual,” the following MasterCard Rules are imposed on merchant conduct:

9.11 Honor MasterCard Cards

9.11.1 Honor All MasterCard Cards
The merchant must honor all valid MasterCard cards without discrimination when properly presented for payment. The merchant must maintain a policy that does not discriminate amount customers seeking to make purchase with a MasterCard card. A merchant that does not deal with the public at large (for example, a private club) is considered to comply with this rule if it honors MasterCard cards of cardholders that have purchasing privileges with the merchant.

9.11.2 Cardholder Identification

A merchant must not refuse to complete a MasterCard card transaction solely because a cardholder who has complied with the conditions for presentment of a card at the POI refuses to provide additional identification information, except as specifically permitted or required by the Standards. [Note: The “Merchant Rules Manual” at page two-two (2-2) provides that “As used herein, Standards means the bylaws, rules and policies, and the operating regulations and procedures of the Corporation, as may be amended from time to time.] A merchant may require additional identification form the cardholder if the information is required to complete the transaction, such as for shipping purposes. A merchant in a county or region that supports use of the MasterCard Address Verification Service (AVS) may required the cardholder’s ZIP or postal code to complete a cardholder-activated terminal (CAT) transaction, or the cardholder’s address and ZIP or postal code to complete a mail order, phone order, or e-commerce transaction.

9.12 Prohibited Practices

9.12.1 Discrimination

A merchant must not engage in any acceptance practice that discriminates against or discourages the use of MasterCard cards in favor of any other acceptance brand.

9.12.2 Charges to Cardholders

A merchant must not directly or indirectly require any MasterCard cardholder to pay a surcharge or any part of any merchant discount or any contemporaneous finance charge in connection with a MasterCard card transaction. A merchant may provide a discount to its customers for cash payments. A merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the life) if the fee is imposed on all like transactions regardless of the form of payment used.

  • A surcharge is any fee charge in connection with a MasterCard transaction that is not charged if another payment method is used.

  • The merchant discount fee is the fee the merchant pays to its acquirer to acquire transactions.

9.12.3 Minimum/Maximum Transaction Amount Prohibited

A merchant must not require, or post signs indicating that it requires, a minimum or maximum transaction amount to accept a valid MasterCard card.

B. As per page two-nineteen (2-19) through two-twenty (2-20) of the “Merchant Rules Manual,” any violation by a merchant of the aforementioned MasterCard Rules is addressed as follows:

9.5 Merchant Noncompliance

9.5.1 Specified Rules Violations

If the Corporation becomes aware that any merchant has violated any of the following rules:

  • Honor MasterCard Cards (section 9.11);

  • Use of the MasterCard Mark (section 9.10);

  • Charges to Cardholders (section 9.12.2);

  • Minimum/Maximum Transaction Amount Restrictions (section 9.12.3); or

  • Prohibited Transactions (section 9.12.4),

The Corporation will notify the acquirer of the violation and request that it take action to ensure that the merchant discontinues promptly, and in no more than 10 business days, the violative practice. A notification by the Corporation of a violation at any one merchant location requires the member to ensure that the practice is discontinued at all locations covered by the merchant agreement(s).

9.5.2 Assessments

If the Corporation’s staff becomes aware of any merchant or any DSE in violation of section 9.15 of these rules, the Corporation may identify and advise the acquirer of such violation, and may impose an assessment for noncompliance of up to USD 100,000 per individual violation, with a maximum aggregate assessment of USD 500,000 for additional or continuing violations during any consecutive 12-month period.

In addition, if a merchant or any DFS is determined to be in violation of section 9.15, or if a member is determined to be in violation of section 3.7 of these rules, and if such violation results in compromised account information, the acquirer must comply with the requirements set forth in section 5.12 of the Security Rules and Procedures manual.

C. Furthermore, the “Frequently Asked Questions” portion of the website maintained by MasterCard International Corporation directs a consumer to “Please complete and Submit the Merchant Violation form to report a merchant/retailer that did not accept your MasterCard card.” The Merchant Violation form asks the consumer to:

Provide the following information if you have experience a problem with a merchant/retailer who displays the MasterCard brand mark (logo) at their store location but would not accept your MasterCard card for a purchase. Or for a merchant who refuses to accept payment below a certain dollar amount with your MasterCard card.

The end of the Merchant Violation form also asks the consumer to delineate the type of violation as either of the following:

  • In order to make a MasterCard purchase, the merchant/retailer required a minimum or maximum amount.

  • The merchant/retailer is adding a charge for using your MasterCard card.
  • The merchant/retailer required identification.
  • A merchant/retailer displaying the MasterCard decal in their window refused to accept my MasterCard card.

VISA U.S.A. INCORPORATED

A. As per page ten (10) of the “Rules for Visa Merchants: Card Acceptance and Chargeback Management Guidelines,” the following Visa Rules are imposed on merchant conduct:

Dollar Minimums and Maximums – Always honor valid Visa cards, in your acceptance category, regardless of the dollar amount of the purchase. Imposing minimum or maximum purchase amounts is a violation.

No Surcharging – Always treat Visa transactions like any other transaction; that is, you may not impose any surcharges on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment.

[Note: As per the disclaimer appearing on page four (4) of the “Rules for Visa Merchants:”

This guide contains information based on the current Visa U.S.A. Inc. Operating Regulations. If there are any technical differences between the Visa U.S.A. Inc. Operating Regulations will prevail in every instance. Your merchant agreement and the Visa U.S.A. Inc. Operating Regulations take precedence over this guide or any updates to its information.]

B. Furthermore, the “Ask Visa” portion of the relevant website provides the following:

Minimum Purchase
Visa merchants are not permitted to establish minimum transaction amounts, even on sale items. They also are not permitted to charge you a fee when you want to use your Visa card.

If you run into a problem like this with a merchant, please notify the financial institution that issued you your Visa card. These institutions have access to the appropriate Visa rules and regulations and can help you document and file your complaint. You’ll find their address and/or telephone number on your Visa statement. Their telephone number may also appear on the back of the card itself.

AMERICAN EXPRESS

“As an end note,” writes Erik, “I did an exhaustive search on the American Express website and found no information on the subject. Apparently they don’t care enough about these issues to inform consumers what merchant conduct is acceptable by way of the agreement. I called American Express twice. It took three minutes each time to reach both Fredrick and Marlin respectively. Each persona possessed a noticeable accent so I can’t even be sure I got their names correct. As with Fredrick I asked four questions. First, does the typical merchant agreement permit merchants to require that consumers make a minimum purchase in order to use an American Express card? Fredrick told me some merchants may do this and typically do so to cover or pass along the fees American Express charges the merchant for use of the service. He also stated that while the merchant is not supposed to do that and the agreement the merchant signs says as much, American Express cannot enforce this requirement because it may not be practical and/or the merchant is acting as a private entity. I wasn’t sure what he meant by this but at least I learned that the American Express merchant agreement should contain a provision precluding this type of merchant conduct. Second, I asked Fredrick whether merchants may charge consumers a fee for using their American Express card. Fredrick was noticeably more concerned and quickly told me that consumer in those situations should promptly call the customer service number ( i.e. 1 (800) 528-4800) and provide the merchant’s name and address. Presumably you’d want to provide the merchant’s telephone number too but I didn’t probe any further. Third, I asked Fredrick whether I could obtain a copy of the American Express rules and regulations in the merchant agreement, etc. that covered these issues? He told me no. I asked whether they were available online? He politely put me on hold and returned 3 minutes later. He explained such information was not available online and any consumer complaints should be directed to the customer service number. We parted ways and I thought about the experience for a minute. Fredrick didn’t seem fully confident in his responses so I called again, hoping for some confirmation or clarity. I got Marlin instead. I didn’t even get through the first question. Maybe I didn’t explain myself clearly enough but when asked whether merchants can requirement a consumer to make a minimum purchase to use their American Express card, Marlin simply said “There’s no such thing here with American Express.” Go figure. I thanked him for his time and hung up.”