Summary:

 House Bill 476 (HB 476) enacts the Price Fixing Prohibition, Consumer Transparency and Tax Fairness Act, prohibiting payment card networks and covered credit card issuers from engaging in network interchange price-fixing. The bill also prohibits charging interchange fees on tax amounts and gratuities in electronic payment transactions. It establishes penalties for violations and grants enforcement authority to the Attorney General. The bill applies to payment card networks, acquirer banks, processors, and issuers involved in electronic payment transactions. 

Legislation Overview:

 House Bill 476 (HB 476) prohibits network interchange price-fixing by payment card networks and covered credit card issuers. It makes it unlawful for payment card networks to fix or conspire to fix interchange fees with other networks or issuers, require merchants to accept specific credit cards, charge fees without findings of responsibility for disputed transactions, or penalize merchants for pricing goods or services lawfully. The bill also prohibits covered credit card issuers from using fee schedules established by payment card networks, receiving interchange fees on fee schedules used by other issuers, or issuing statements without disclosing interchange fees for each transaction.

The bill further prohibits issuers, payment card networks, acquirer banks, and processors from charging interchange fees on taxes and gratuities. Merchants must provide tax and gratuity amounts as part of the authorization or settlement process to avoid being charged interchange fees on these amounts. If a merchant does not provide this data at the time of the transaction, they may submit documentation within 180 days to request a refund of interchange fees on tax or gratuity amounts. The bill also prohibits altering the computation of interchange fees to circumvent the tax and gratuity exemption.

Enforcement is granted to the Attorney General, who may file suit to seek injunctive relief and civil penalties against violators. The bill establishes a civil penalty of $1,000 per transaction for issuers, networks, banks, or processors that charge interchange fees on taxes or gratuities after receiving tax documentation from merchants. It also prohibits entities involved in electronic payment transactions from using or disseminating transaction data beyond what is necessary for processing, fraud prevention, or customer services. Violations of data use provisions are considered unfair practices under the Unfair Practices Act. The bill includes a severability clause, ensuring that if any part of the act is found invalid, the remaining provisions remain in effect.

Implications

HB 476 seeks to enhance fairness and transparency in credit and debit card transactions by prohibiting network interchange price-fixing and eliminating interchange fees on taxes and gratuities. The ban on price-fixing aligns with broader efforts to prevent anti-competitive practices in financial transactions. By preventing payment card networks from coordinating interchange fees with issuers, the bill may reduce transaction costs for merchants and consumers. The prohibition on requiring merchants to accept all cards from a network ensures greater competition among card brands and provides businesses with more flexibility in payment processing.

The restriction on interchange fees for taxes and gratuities directly benefits merchants by reducing the fees they pay on non-revenue portions of transactions. Restaurants, hotels, and other service-based industries with tipping structures are particularly affected, as interchange fees currently apply to gratuities in most card transactions. The ability to request refunds for interchange fees on taxes and gratuities provides merchants with a mechanism to recover excessive costs, though the administrative burden of submitting documentation may deter some businesses from taking advantage of this provision.

The enforcement provisions grant the Attorney General broad authority to pursue violators, potentially increasing oversight and compliance within the payment processing industry. The $1,000 per transaction penalty for charging interchange fees on taxes and gratuities could serve as a strong deterrent against violations. The bill’s restrictions on the use of payment transaction data strengthen consumer privacy protections and align with national efforts to regulate data usage in financial transactions.

Potential challenges include implementation and enforcement, as payment networks and issuers may seek to restructure fees in ways that comply with the law while maintaining revenue streams. Additionally, financial institutions may challenge the legality of state-level regulation of interchange fees, arguing that such regulation conflicts with federal banking laws and card network rules. The administrative requirements for merchants to submit tax documentation and request refunds may also limit the effectiveness of the fee exemption.
 

Current Law:

 Under current law, payment card networks and credit card issuers set interchange fees based on network-established fee schedules, which apply uniformly across merchants and transactions. Interchange fees are generally charged as a percentage of the total transaction amount, including taxes and gratuities. No current law in New Mexico prohibits price-fixing in network interchange fees or restricts fees on taxes and gratuities. Existing regulations under federal law, such as the Durbin Amendment of the Dodd-Frank Act, impose limits on debit card interchange fees but do not extend similar restrictions to credit card transactions.