2012 -- S 2273

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LC01010

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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

     Introduced By: Senators Picard, and Miller

     Date Introduced: February 01, 2012

     Referred To: Senate 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. – (a) Courts have found that Visa and MasterCard and their member

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banks have significant market power.

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     (b) Electronic payment system networks set the level of credit and debit card interchange

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

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     (c) Competitors should set their own fees and prices and compete on that basis.

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     (d) These fees inflate the prices consumers pay for goods and services and often subsidize

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the rewards and benefits of the most affluent cardholders at the expense of less affluent customers

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who do not receive such rewards, or use credit cards at all.

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     (e) Consumers are increasingly using credit and debit card electronic payment systems to

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purchase goods and services.

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     (f) 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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     (g) Some electronic payment system networks market themselves as providers of

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currency and promote use of their products as though they were a complete substitution for legal

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tender.

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     (h) Due to the market power of the two largest electronic payment system networks,

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merchants do not have the power to negotiate with regards to terms for acceptance of credit and

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debit cards and the cost of the interchange fees for such acceptance.

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

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

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operational changes, or changes in the cost of card acceptance.

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

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cost of accepting various types of payment.

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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 System” means an entity which is not 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 are required to access in order to accept a specific

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brand of general-purpose credit cards, charge cards, debit cards or stored-value cards as payment

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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 system may, directly or through any agent, processor or member of the

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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. This shall include,

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but not be limited to, a display for a discount to be provided to a consumer for using a form of

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payment that carries lower fees for 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 a 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 system may set required, suggested, or default rates for the fees to be charged

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by any issuer of its payment cards, agent, processor or member of the system unless such issuer,

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agent or processor is the electronic payment system itself and not a separate legal entity.

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

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chapter shall reimburse all affected merchants for all chargebacks, fees, and fines collected from

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affected merchants directly or through any agent, processor or member of the system during the

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period of time in which the electronic payment system was in violation and be liable for a civil

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penalty of ten thousand dollars ($10,000) per chargeback, fee or fine levied in violation of this

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chapter.

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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 the application of this chapter to any person or circumstance, is held

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invalid by a court of competent jurisdiction, the remainder of the chapter, rule, or regulation and

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the application of that provision to other persons or circumstances shall not be affected. The

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invalidity of any section or sections or parts of any section or sections of this chapter shall not

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affect the validity of the remainder of the chapter.

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     SECTION 2. This act shall take effect upon passage.

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LC01010

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO COMMERCIAL LAW--GENERAL REGULATORY PROVISIONS

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     This act would establish penalties for unfair practices by electronic payment systems.

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     This act would take effect upon passage.

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LC01010

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