2013 -- S 0009

=======

LC00368

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO COMMERCIAL LAW--GENERAL REGULATORY PROVISIONS

     Introduced By: Senator Joshua Miller

     Date Introduced: January 16, 2013

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

1-1

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

1-2

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

1-3

     CHAPTER 26.2

1-4

PREVENTION OF CREDIT CARD COMPANY UNFAIR BUSINESS PRACTICES

1-5

     6-26.2-1. Findings. – (a) Courts have found that Visa and MasterCard and their member

1-6

banks have significant market power.

1-7

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

1-8

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

1-9

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

1-10

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

1-11

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

1-12

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

1-13

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

1-14

purchase goods and services.

1-15

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

1-16

to accept credit and debit cards.

1-17

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

1-18

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

1-19

tender.

2-20

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

2-21

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

2-22

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

2-23

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

2-24

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

2-25

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

2-26

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

2-27

cost of accepting various types of payment.

2-28

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

2-29

meanings:

2-30

     (1) “Electronic Payment System” means an entity which is not a national bank that

2-31

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

2-32

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

2-33

clearance, and settlement, and that merchants are required to access in order to accept a specific

2-34

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

2-35

for goods or services.

2-36

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

2-37

or services for sale in this state.

2-38

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

2-39

– No electronic payment system may, directly or through any agent, processor or member of the

2-40

system:

2-41

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

2-42

relating to the display of pricing for goods or services for sale by the merchant. This shall include,

2-43

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

2-44

payment that carries lower fees for the merchant;

2-45

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

2-46

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

2-47

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

2-48

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

2-49

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

2-50

acceptance of a credit card;

2-51

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

2-52

payment system at one of its locations;

2-53

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

2-54

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

3-1

products of that electronic payment system; or

3-2

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

3-3

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

3-4

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

3-5

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

3-6

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

3-7

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

3-8

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

3-9

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

3-10

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

3-11

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

3-12

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

3-13

chapter.

3-14

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

3-15

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

3-16

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

3-17

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

3-18

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

3-19

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

3-20

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

3-21

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

3-22

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

3-23

affect the validity of the remainder of the chapter.

3-24

     SECTION 2. This act shall take effect upon passage.

=======

LC00368

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO COMMERCIAL LAW--GENERAL REGULATORY PROVISIONS

***

4-1

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

4-2

     This act would take effect upon passage.

=======

LC00368

=======