2012 -- H 7675

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LC01424

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO COMMERCIAL LAW--GENERAL REGULATORY PROVISIONS --

CREDIT CARD BUSINESS PRACTICES

     Introduced By: Representative Donald J. Lally

     Date Introduced: February 16, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 6 of the General Laws entitled "COMMERCIAL LAW - GENERAL

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REGULATORY PROVISIONS" is hereby amended by adding thereto the following chapter:

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     CHAPTER 26.2

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PREVENTION OF CREDIT CARD COMPANY UNFAIR BUSINESS PRACTICES

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     6-26.2-1. Findings. – The legislature hereby finds and declares: (1) Courts have found

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that the electronic payment networks, Visa and MasterCard, and their member banks have market

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power.

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     (2) Electronic payment networks, set the level of credit and debit card interchange fees

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charged by their member banks even though those banks are supposed to be competitors.

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     (3) Competing banks should set their own interchange fees and compete on that basis.

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     (4) These fees inflate the prices consumers pay for goods and services. They also

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subsidize the most affluent reward cardholders, at the expense of less affluent consumers, who do

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not use reward cards (or do not use cards at all).

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     (5) Consumers increasingly use credit and debit cards to purchase goods and services.

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     (6) In order to provide the desired convenience to consumers, most merchants must agree

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to accept credit and debit cards.

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     (7) Some electronic payment networks, market themselves as providers of currency, and

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promote use of their products as though they were a complete substitute for legal tender.

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     (8) Due to the market power of the two (2) largest electronic payment networks,

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merchants do not have the power to negotiate the terms of acceptance of credit and debit cards.

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     (9) Merchants are subject to contracts that allow the electronic payment networks to

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change the terms without notice, subject merchants to staggering fines, require costly operational

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changes or change the cost of card acceptance.

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     (10) Merchants need the flexibility to price their goods and services in accordance with

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the cost of accepting various types of payments.

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     6-26.2-2. Definitions. – As used in this chapter, the following terms have the following

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meanings:

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     (1) “Electronic Payment Network” means an entity, other than a national bank, that

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directly, or through licensed members, processors or agents, provides the proprietary services,

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infrastructure, and software, that route information and data to facilitate transaction authorization,

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clearance, and settlement, and that merchants access in order to accept a brand of general-purpose

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credit cards, charge cards, debit cards or stored-value cards, as payment for goods or services.

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     (2) “Merchant” means a person or entity doing business in this state, which offers goods

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or services for sale in this state.

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     6-26.2-3. Protection of retail competition from credit card company unfair practices.

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– No electronic payment network may, directly or through any agent, acquirer, or processor

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member of the system:

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     (1) Impose any requirement, condition, penalty, or fine in a contract with a merchant

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relating to the display of pricing for goods or services for sale by the merchant;

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     (2) Inhibit the ability of any merchant to offer its customers discounts or in-kind

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incentives for using a form of payment (such as cash, check, debit card, or credit card);

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     (3) Inhibit the ability of any merchant to offer its customers discounts or in-kind

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incentives for using a debit or credit card of another electronic payment system;

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     (4) Prevent any merchant from setting minimum or maximum dollar value for its

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acceptance of a credit card;

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     (5) Inhibit the ability of any merchant to decide not to accept the products of an electronic

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payment system at one of its locations;

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     (6) Prevent any merchant from deciding not to accept certain products of an electronic

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payment system based on the fees associated with such products while still accepting other

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products of that electronic payment system; or

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     (7) Prevent any merchant from choosing how to route a transaction among any of the

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electronic payment networks authorized to clear transactions on the card in question.

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     6-26.2-4. Prohibition on cartel price-setting by credit card companies. – No

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electronic payment network may set required, suggested, or default rates for the fees to be

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charged by any issuer of its payment cards, agent, processor or member of the system for

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transactions occurring within this state unless such issuer, agent or processor is the electronic

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payment system itself and not a separate legal entity.

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     6-26.2-5. Penalties. – (a) Any electronic payment network found to have violated section

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6-26.2-3 or 6-26.2-4 of this chapter shall reimburse all affected merchants for all chargebacks,

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fees, and fines collected from affected merchants directly or through any agent, processor or

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member of the system during the period of time in which the electronic payment system was in

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violation and be liable for a civil penalty of ten thousand dollars ($10,000) per chargeback, fee or

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fine, levied in violation of section 6-26.2-3 or 6-26.2-4.

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     (b) Any merchant whose rights under this chapter have been violated may maintain a

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civil action for damages or equitable relief as provided for in this section.

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     (c) The attorney general may maintain a civil action for damages or equitable relief as

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provided for in this section to protect against violations of this chapter.

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     6-26.2-6. Severability. -- If any provision of this chapter or of any rule or regulation

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made under this chapter, or its application to any person or circumstance is held invalid by a court

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of competent jurisdiction, the remainder of the chapter, rule, or regulation and the application of

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the provision to other persons or circumstances shall not be affected by this invalidity. The

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invalidity of any section or sections or parts of any section or sections shall not affect the validity

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of the remainder of the chapter.

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     SECTION 2. This act shall take effect upon passage.

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LC01424

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO COMMERCIAL LAW--GENERAL REGULATORY PROVISIONS --

CREDIT CARD BUSINESS PRACTICES

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     This act would protect merchants that use credit and debit card services, provided by

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electronic payment networks, from specified unfair business practices, by imposing certain

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prohibitions and financial penalties.

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     This act would take effect upon passage.

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LC01424

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