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HB 1881 would allow a private school to place a reasonable and necessary surcharge to recover the transaction costs of processing a payment made by debit or credit card. This bill would also allow a reasonable charge in connection with a payment transaction refused for insufficient funds. However, the school must notify the person making the payment of any fee to be charged.
The second chamber sponsor is Senator Brandon Creighton.
No amendments or modifications have been made to the bill since we reported on it. We continue to support it, with the recommended amendment.
First chamber recommendation:
Businesses that accept credit and debit cards are charged a fee by the companies that process the charges when the card is swiped. The charge for those fees is usually 3% of the transaction. Some businesses would like to pass that charge on to the consumers by adding a surcharge on to purchases made using debit or credit cards. Cash customers would not have to pay the surcharge.
Currently, under Section 59.402 and 339.001 of the Finance Code, an imposition of a surcharge for use of a credit card or debit card is not allowed unless it is by a governmental authority. That includes public schools and institutions of higher education. However, their private sector competitors do not have the benefit of being able to pass along the transaction fee to the customer. This creates an artificial competitive advantage for government schools.
This bill would amend the current statute to allow private schools to levy a transaction fee surcharge just as public schools already do.
If the private school competitors could not already levy a surcharge, this bill would create a special privilege for one type of business which we would oppose. However, because their competitors already have the benefit of passing the transaction fee on to customers, it is within the proper role of government to remove the prohibition from private schools. We support HB 1881.
Ultimately, preventing businesses from recovering their transaction costs by surcharge is a big government regulation that should be done away with entirely. While legislators are considering HB 1881, they may want to take a further step by amending the bill to do away with the surcharge prohibition altogether.