Legislation Calls for Merchant Agreement Disclosure

State Senator Charles Fuschillo and Assemblymember Richard Brodsky have introduced a bill to require banks and credit card companies to lift the veil of secrecy from their agreements with merchants. The legislation, S5035 - A7775, would require banks and other financial institutions to make a complete copy of their rules available to merchants and to disclose the complete schedule of interchange fees, transaction rates and other fees charged to merchants. And the bill prohibits including a non-disclosure requirement in merchant agreements.

The rates charged to merchants and the rules imposed on them by banks and other financial institutions are amongst the biggest mysteries in business. Two companies (Mastercard and Visa) essentially control the marketplace. They seem to raise rates at will without any rhyme or reason, provide only a portion of their rules to merchants leaving merchants at risk of violating rules they aren’t familiar with, and their non-disclosure rules make it impossible for merchants to compare their deals with others.

This bill is a good first step to bringing merchants’ costs under control and will provide merchants with the opportunity to make more informed decisions. Open disclosure will promote competition and guard against unfair and unauthorized charges. Combined with efforts at the federal level to more tightly regulate the banks and other financial institutions, merchants may be in store for improved terms and conditions in their merchant agreements.