Key Takeaways
- Surcharge compliance includes state laws, card brand rules, and operational standards (training and documentation).
- Avoid costly mistakes: never surcharge debit cards, always disclose fees properly, and maintain consistent rates across locations.
- Surcharge programs can save dealerships thousands monthly—but success requires expert implementation and ongoing compliance management.
Credit card processing fees can add significantly to auto dealership costs. Implementing a robust surcharge program can be an effective solution to offset them, but success hinges on proper compliance with state regulations and card brand requirements, as well as seamless implementation.
Let's explore the key compliance considerations for auto dealers looking to implement surcharge programs.
Understanding Surcharging Basics
A surcharge program enables merchants to pass credit card processing fees to customers who pay with credit cards. For auto dealerships, where transaction amounts can be substantial, eliminating these processing fees can translate to significant savings—often thousands of dollars per month.
Key Compliance Requirements
A compliant surcharge program requires adherence to state regulations, card brand requirements, and operational standards. For auto dealerships implementing these programs, understanding and following each layer of compliance is essential for success and avoiding penalties.
State-Level Compliance
First and foremost, verify that surcharging is legal in your state. Currently, surcharging is prohibited in:
- Connecticut
- Massachusetts
Other states that permit surcharging may have specific requirements or limitations, such as disclosure requirements, prohibition on debit cards when processed as credit, or surcharge limits. In Colorado, for example, a surcharge must not exceed 2% of the transaction amount or the actual cost of payment processing, whichever is lower.
And, if you operate dealerships across multiple states, you'll need to ensure compliance with each state's specific regulations.
Given the variability and complexity of these laws, it's advisable to consult your state's official statutes, seek legal counsel, or consult with an expert such as RevUpX to ensure compliance with current regulations.
Card Brand Requirements
All four major card networks—Visa, Mastercard, American Express, and Discover—permit surcharging with requirements that, while varying slightly in specifics, address the same core program components:
- Program Registration: Advance notification of intent to surcharge, typically 30 days before implementation.
- Fee Limitations: Caps on surcharge amounts, generally not to exceed your cost of acceptance一actual credit card processing fees一or 4% of the transaction amount, whichever is lower.
- Disclosure Requirements:
- Clear signage at store entrances
- Visible disclosure at points of sale
- Explicit notification before transaction completion
- Separate line on receipts showing the surcharge amount
- Payment Method Equality: Consistent surcharge treatment across credit card brands and prohibition of surcharges on debit and prepaid cards.
- Transaction Processing: Specific requirements for proper coding, reporting, and handling of both in-person and card-not-present transactions
Each brand maintains its own specific guidelines for implementation details, disclosure language, and receipt formatting. Working with an experienced payment processor ensures compliance with all network-specific nuances.
The Big Four
For detailed information on surcharge requirements, consult card network official guidelines:
Operational Compliance
Beyond meeting state and card brand regulations, dealerships must maintain rigorous operational standards for their surcharge programs:
- Clear Disclosure: As mentioned above, disclosure of a surcharge program must be explicit. This includes visible signage at store entrances and payment counters, clear disclosure language on payment pages for online transactions, and verbal scripts to inform customers of applicable surcharges before processing phone payments.
- Differentiate Between Credit & Debit Transactions: Staff must be trained to distinguish between credit and debit card transactions, as surcharges apply only to credit cards.
- Accurate Transaction Coding & Reporting: All transactions must be accurately coded in your payment system, with surcharges itemized on receipts and included in the total amount.
- Regular Staff Training: Continuous employee training ensures consistent execution and compliance while maintaining documentation—such as signage photos, training records, and transaction data—that supports audit readiness.
- Compliance Documentation Maintenance: Creating standard operating procedures for these requirements helps ensure consistent compliance across all aspects of your surcharge program.
Common Compliance Pitfalls
To maintain a compliant surcharge program, avoid these common mistakes:
- Incorrect Fee Application: Applying surcharges to debit card transactions is prohibited and can result in significant penalties.
- Inadequate Disclosure: Failing to properly notify customers about surcharges before transaction completion.
- Inconsistent Implementation: Applying different surcharge rates across locations or card brands.
- Poor Documentation: Failing to maintain records of surcharge program implementation and ongoing compliance measures.
The Value of an Experienced Partner
A well-implemented surcharge program can significantly improve your dealership's profitability while maintaining customer satisfaction. However, implementing and maintaining a compliant surcharge program requires expertise and diligent management. This is where partnering with RevUpX delivers significant value. As an industry leader in merchant services, RevUpX brings:
- Deep Industry Knowledge: Over 100 years of combined experience working with major players such as American Express, Fiserv, and CardConnect.
- Comprehensive Implementation Support: This includes:
- Complete program setup
- Staff training
- Compliant signage and disclosure language
- State-specific compliance guidance
- Advanced Technology: State-of-the-art Clover terminals and CardPointe Gateway virtual terminals powered by Fiserv's processing platform.
- Ongoing Compliance Monitoring: Regular updates on regulatory changes and assistance in maintaining program compliance.
Take the Next Step
Implementing a compliant surcharge program doesn't have to be complicated. RevUpX specializes in helping auto dealerships navigate the complexities of payment processing while ensuring full regulatory compliance.
Book a meeting with RevUpX today to discover how we can help you implement a successful and compliant surcharging program, optimizing your dealership's payment processing while driving profitability and growth.
