San Francisco, CA asked in Consumer Law, Business Law, Gov & Administrative Law and Municipal Law for California

Q: Autopay (water bill) with a credit card & paperless billing since 2008: Can city now charge fee for credit card use?

The city gets to save money with paperless billing. The customers set up auto pay with a credit card. This was a win-win. But the city now wants to change terms saying they will charge customers for credit card fees. This eliminates the incentive for the city to use a low cost credit card processor. They could use an expensive one where transaction fees are paid the the assigned account holder, not just the credit card company. Since this has been happening since Nov 2008, it now is illegal to change terms after 16 years regardless of code 6159(h)(1) correct? (Different from a service where credit card fee has always been paid by the customer. )

1 Lawyer Answer
James L. Arrasmith
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  • Consumer Law Lawyer
  • Sacramento, CA
  • Licensed in California

A: In California, businesses, including cities providing utilities, have the discretion to charge fees for credit card transactions, subject to state regulations and any agreements they may have with customers. The legality of introducing a new fee after a service has been provided under certain terms for an extended period hinges on the terms of the original agreement and applicable laws. California Civil Code Section 1748.1 allows merchants to charge a fee for the convenience of using a credit card in certain circumstances, but this must be clearly disclosed and cannot exceed the cost of processing the credit card transaction.

If your city decides to implement a new fee for credit card use, it must ensure that this change is communicated effectively and in accordance with any existing agreements or policies that govern your utility services. This includes providing adequate notice to customers before any changes take effect, allowing customers the opportunity to make informed decisions about their payment methods. Additionally, the city should ensure that the fee does not exceed the actual cost of processing the credit card transactions, to comply with regulations that protect consumers from excessive charges.

It's also important to consider whether the original terms of service or any subsequent agreements explicitly forbid the introduction of new fees or changes to the billing process. If there is a clause that limits the ability to modify terms or introduce new fees, the city may be restricted in its ability to impose such charges. In any case, if there are concerns or disputes regarding the legality or fairness of the new fees, it may be beneficial to seek legal guidance or contact consumer protection agencies for assistance in resolving the issue.

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