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Can States Ban Credit Card Surcharges?

Late fees, overdraft charges, and unexpected credit card surcharges are the bane of many shoppers’ existence. Banks and credit card providers frequently charge consumers and businesses alike for the privilege of using their services. While many states have attempted to restrict financial institutions from these charges, they haven’t always succeeded.  

For example, as of 2018, the 9th Circuit Court upheld a ruling that permits stores to charge consumers to recoup their costs by passing them along to shoppers. This means that existing California laws banning credit card surcharges are not enforceable. Merchants can charge you extra just to use your credit card, so they don’t have to directly pay credit card processors out of their profits.

Despite this, there are still laws that should protect you from predatory charges and fees. Both state and federal regulations require financial institutions to be transparent and honest about how and when they’ll charge you. Here’s what you need to know about legal protections against unfair bank and credit card charges and how you can fight back if you’ve been charged unjustly.

Laws on Bank and Credit Card Charges

Regulations regarding what banks and credit cards may charge vary from state to state. However, specific federal laws apply to financial institutions nationwide. Whether you live in Pennsylvania or California, you’re guaranteed rights under the following regulations:

The Truth in Lending Act of 1968 (TILA)

This Act first codified the information lenders and creditors must share with consumers. Under TILA, all lending institutions and credit card companies must disclose the following information to consumers before extending them credit:

  • Annual percentage rate (APR): The APR of a loan is the actual yearly cost of that loan. This is different from and usually higher than the interest rate. The APR includes other costs beyond interest, including transaction fees, late fees, and other charges. 
  • Term and requirements of the loan: Lenders must inform people how long the loan will last and when payments are due to ensure they have the opportunity to pay it off on time without accruing late fees.
  • Fees and total costs: The lender must clearly communicate any additional charges consumers could face and how those fees are incurred.

Under TILA, any fee a bank or credit card company charges you without informing you about it in your initial contract is illegal. 

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act)

Much more recently, the CARD Act was designed to halt abusive practices by credit card companies. Under the law, these companies cannot:

  • Charge higher interest rates to future balances because of a missed payment.
  • Increase interest rates without warning.
  • Charge unlimited fees or impose expiration dates on non-reloadable prepaid cards.
  • Charge customers for exceeding their credit limit without consent.

Examples of an illegal fee under this law would be charging you an over-limit fee when you did not opt into the protection program or charging you higher interest rates for any reason without sufficient notice. 

The FDIC 2010 Overdraft Payment Program

This program imposes on banks and lenders many of the same restrictions as the CARD Act placed on credit card companies. Under the Overdraft Payment Program, the FDIC requires lenders to clearly communicate fees and provide customers with clear options to opt-out of overdraft protection programs. It also instructed banks to limit place caps on daily overdraft and NSF charges and banned the use of check-clearing processes intended to maximize these fees. Violating these guidelines is frowned upon by the FDIC and may be grounds for legal action. 

In addition, Congress is considering a new law called the Overdraft Protection Act of 2021 (OPA). This bill would further limit banks’ and other lenders’ abilities to charge overdraft coverage fees and what these fees should include should it pass. 

Fighting Back Against Illegal Charges

If you think you’ve faced an illegal charge, you can stand up to the financial institution trying to take advantage of you. Here’s what you can do to pursue a refund of these charges and hold the institution accountable for its unlawful actions:

  • Document transactions, charges, and fees: Keep thorough financial records of your transactions at the bank or on your credit card. This includes keeping receipts for your purchases, copies of your statements, and any communications you’re sent about your account. This helps you build a paper trail demonstrating that you were charged unfairly or without being informed. 
  • File a dispute: Next, you can file a dispute with the institution. These unjust fees may sometimes be simple mistakes you can resolve by sending an email or letter and getting them reversed. However, some unscrupulous institutions may refuse to reverse the charges, claiming that you were informed about the possible fees when you weren’t. 
  • Take legal action: If a dispute doesn’t resolve your problem, you should consider legal action. It’s more than likely that a credit card company or bank willing to abuse you is also harming other customers. You can consult with an experienced class action lawsuit attorney to discuss your situation and determine whether you have grounds to file a civil claim. 

Legal Help for Illegal Fees and Surcharges

You don’t need to accept that fees are unavoidable in using financial services. If you’ve been charged overdraft fees despite opting out or received other fees you weren’t told about in advance, your rights may have been violated. 

If so, you can get help and reclaim the funds that the institution has taken. The expert attorneys at the Law Offices of Todd M. Friedman are prepared to help you stand up to banks and credit card companies that are charging you unjust fees. You can get your free case consultation by calling us at 1-323-973-2629 or reaching out online

This is attorney advertising. These posts are written on behalf of Law Offices of Todd M. Friedman, P.C. and are intended solely as informational content. These blogs in no way provide specific or actionable legal advice, nor does your use of or engagement with this site establish any attorney-client relationship. Please read the disclaimer