The change stems from a lawsuit settled between retailers and the payment industry, but sources say it won’t necessarily lead to a significant shift in the way auction companies do business.
Although businesses in 40 states are now allowed to have credit card surcharges, Randy Bregman recommends Auctioneers stick with offering a discount to buyers who pay with cash or check.
A discount incentive is better received than an additional fee, says Bregman, of the National Auctioneers Association’s Credit Card Program.
The settlement was reached in a lawsuit between retailers, nine major banks and Visa and MasterCard. According to nonprofit Consumer Action, as part of the agreement, retailers now have the option to charge a surcharge when a customer uses a credit card — also referred to as a checkout fee or swipe fee.
The fees cannot apply to debit cards and are not allowed in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
The change was effective in late January.
Bregman, though, says the new rules aren’t altering the advice he has provided to auction professionals for years.
Before the change, businesses couldn’t charge buyers a fee for paying by credit card. Therefore, Bregman says he recommended, for example, that auction professionals used a 13 percent buyer’s premium that was discounted by 3 percent when buyers paid with cash.
The 3 percent generally covers what credit card companies charge merchants for credit card transactions.
Merchants that charge a new credit card transaction fee must provide signage or other clear disclosure of the fee at their entrance, the point of sale and on customer receipts, according to Consumer Action. The fee must be disclosed at the point of sale for online transactions.
Bregman says it is important that Auctioneers recover the fees they pay to credit card companies in some way. While he supports collecting the money from the buyer, he also suggests Auctioneers consider adding the fee into the seller’s costs.
“I always felt that the seller should cover credit card fees because it is part of the Auctioneer’s overhead costs, and the sellers always cover overhead,” Bregman says.
Read on for the perspective of Steve Proffitt, Vice President and General Counsel for J.P. King Auction Co. Inc., Gadsden, Ala., who refers to the situation as “fertile ground for the old unintended consequence.”