Can law firms surcharge debit cards?

Compliant Surcharging: Credit? Yes. Debit? Not so fast.

One of our most popular features at Confido Legal is our compliant surcharging, enabling firms to shift credit card processing fees to their clients. When we talk with firms, many are surprised to learn that it's against federal law for small businesses, including law firms, to shift processing fees on debit cards. A smaller group is not just surprised but a bit concerned because they've been shifting card fees on debit cards unknowingly.

In this blog post, we break down the reasons why surcharging on debit card transactions is impermissible and the implications of these restrictions for law firms.

  1. Regulatory Compliance:
    One of the primary reasons surcharging on debit card transactions is not allowed is regulatory requirements. The Durbin Amendment, a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposes restrictions on the fees that merchants can be charged for processing debit card transactions. In line with these limitations, surcharging on debit card transactions is also prohibited.

  2. Prohibited by Card Brands:
    Visa, Mastercard and the other credit card brands set rules for how small businesses, like law firms, can accept their cards. The card brand rules all prohibit surcharging on debit cards. 

  3. The Payment Card Interchange Fee and Merchant Discount Antitrust Litigation:
    The Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, a class-action lawsuit involving Visa, Mastercard, and several major banks, has also influenced the rules surrounding surcharging. While the settlement agreement in this case permits merchants to impose surcharges on credit card transactions, subject to certain limitations and disclosure requirements, it does not allow surcharging on debit card transactions. This prohibition further underscores the importance of adhering to industry regulations and maintaining a transparent relationship with clients.

So, why should lawyers care? 

First, violations of these rules can mean more than a few percentage points here or there. Card brands can levy significant fines against businesses who don't follow their rules and improperly surcharge debit cards. Banks can also levy additional fines. The card brands and/or the banks that support your processor may elect to increase your costs to process or not to allow you to process at all.

Beyond that, your credibility could be significantly compromised. Lawyers establish trust and credibility with their clients in a number of ways. While this may sound ridiculously obvious, one main way they establish this credibility is by knowing and obeying the law themselves. Clients are right to question the credibility of lawyers that wantonly disregard the law.

Law firms should insure that they comply with federal law, the card brand rules, and even the anti-trust settlement by confirming with their processor that they don't surcharge on debit cards.

At Confido Legal, we are dedicated to helping law firms navigate the complexities of payment processing and industry regulations. Our surcharging technology was built to comply with the many federal, state, and even ethics rules that govern the practice. If you're interested in learning more, you can book a demo or grab time to talk to us below.

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