HF4956

Purpose

This bill establishes rules about charges called interchange fees in electronic payment transactions and specifically targets taxes and gratuities paid through card networks. It aims to stop certain interchange fees from being charged on the tax and tip portions of a transaction and to require data sharing about those amounts during payment processing.

Main Provisions

• Interchange fee ban on taxes and gratuities: Issuers, payment card networks, acquirer banks, and processors cannot charge interchange fees on the tax amount or gratuity when a merchant processes an electronic payment that includes those amounts, as long as the merchant provides the tax or gratuity amount data during authorization or settlement.
• Data transmission requirement: The merchant must transmit the tax or gratuity amount data as part of the authorization or settlement process to avoid being charged interchange fees on that portion.
• Alternative documentation path if data isn’t transmitted: If a merchant does not transmit the tax/gratuity data, they may submit tax documentation (such as invoices or receipts) to the acquirer within 180 days after the transaction. After submission, the issuer must credit the merchant within 30 days for the amount of interchange fees charged on the tax/gratuity portion.
• No liability for data accuracy: The bill does not establish liability for payment card networks regarding the accuracy of the tax/gratuity data reported by the merchant.
• Prohibition on fee manipulation: Issuers, networks, acquirer banks, or processors cannot alter or manipulate the calculation or imposition of interchange fees by increasing rates for parts of the transaction not attributable to taxes or other fees charged to the retailer.
• Definitions included: The bill provides definitions for terms used in the interchange context (see Definitions section below).

Definitions (Key Terms Used)

• Acquirer bank: A bank that contracts with a merchant to process and settle electronic payments.
• Authorization: The merchant’s request for approval of a payment transaction.
• Clearance: The transmission of final transaction data to the issuer for posting and fee calculation.
• Debit card / Credit card: Cards or devices used to access funds or credit through a payment network.
• Electronic payment transaction: Any transaction using a debit card, credit card, or similar device to debit an account or use a line of credit.
• Gratuity: A voluntary tip given by a consumer for services.
• Interchange fee: A fee charged by a payment card network to compensate the issuer for its role in an electronic payment.
• Issuer: The entity issuing the card (or its agent).
• Merchant: A person who collects and remits a tax.
• Payment card network: The network that provides the services and infrastructure to route payment data and handle authorization, clearance, and settlement.
• Processor: An entity that handles or manages the payment procedures or settlement.
• Settlement: The process of transmitting sales data to the issuer and calculating net amounts for the merchant and issuer.
• Tax: Any tax imposed by the state or local government at the point of sale.
• Tax documentation: Documents (invoices, receipts, journals, ledgers, tax returns, etc.) used to determine the total transaction amount and the tax or gratuity portion.

Changes to Existing Law

• Adds a prohibition in Minnesota Statutes Chapter 53B against charging interchange fees on the tax and gratuity portions of electronic payments.
• Establishes a data-sharing requirement for tax/gratuity amounts during authorization or settlement to qualify for no interchange fees.
• Creates a fallback process allowing merchants to submit tax documentation within 180 days if data sharing did not occur, with a mandatory credit of interchange fees within 30 days of submission.
• Specifies that networks are not liable for the accuracy of tax/gratuity data reported by merchants.
• Prohibits manipulation of interchange fee calculations by increasing fees for parts of a transaction not attributable to taxes or other retailer charges.

Relevant Terms interchange fee tax gratuity merchant issuer acquirer bank payment card network processor authorization clearance settlement electronic payment transaction tax documentation at point of sale