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Sep 17, 2013 2:48 PMPublication: The Southampton Press

Gas Stations' Credit Card Surcharge Raises Questions

Sep 27, 2013 8:12 AM

Lawmakers and consumer groups are renewing a call to stop service stations from charging consumers extra money when they pay for gasoline with credit cards.

Last month, The Press surveyed gas stations from Riverside to Montauk. Of 33 stations, 14, or about 42 percent, were charging more for credit card purchases than for cash purchases, with the difference ranging from 10 to 17 cents more per gallon. If the average car holds about 15 gallons of gasoline, filling the tank with a credit card could cost an extra $2.50 in many cases.

New York State law forbids the practice of charging a surcharge for credit card purchases for all industries, as do nine other states—but the practice continues, because merchants have found a loophole: they insist that they are offering a discount for cash rather than a surcharge for credit.

“I’ve got legislation trying to limit how much more they can charge for credit card use,” said State Assemblyman Fred W. Thiele Jr., who has been tracking gas prices since Memorial Day 2011. It’s part of his battle against regional gasoline pricing, which is when gas stations in a particular geographical area artificially raise the price of gas based solely on location and time—the Hamptons in summer, for example—rather than any increase in expenses.

“The bill will get rid of the discount-for-cash loophole,” Mr. Thiele said of the conflicting state laws that allow merchants to apply discounts for cash, which makes a ban on credit card surcharges irrelevant. “It’s more than a loophole, by the way, when you can drive a truck through it,” he added.

Following a 2008 investigation by then Attorney General Andrew M. Cuomo that culminated in Mr. Cuomo calling Long Island a hotbed for deceptive practices in the gasoline industry, 43 gas stations on Long Island were sent cease-and-desist letters telling the owners to stop charging more for credit cards. “Customers who use credit cards already pay a premium to their credit card company,” Mr. Cuomo said at the time of interest and other fees.

“The credit card issue has really only sprung up in the last few years, and I’ve had the bill around since it has been an issue,” Mr. Thiele continued last month. “There is a very large pushback from major oil companies, who oppose any regulation of their business.

He added that he has picked up State Senator Kenneth P. LaValle as a co-sponsor to his bill, which may be the extra push the bill needs to pass.

“I think it is unfair. I don’t know what is unique to the gasoline business that allows them to do this,” said Mr. Thiele. “I don’t go to the restaurant and see two different prices. It’s just a ruse to inflate the bottom line, discriminating against those who pay with credit cards, which is a majority of people today.”

According to a Wall Street Journal investigation into the practice last summer, credit card companies charge merchants an average of 2 percent on all purchases nationwide. According to the Press survey, gas stations that do have different prices for cash and credit charge customers an average of 2.5 percent more for using a credit card.

“Gasoline prices appear to have no rhyme or reason, especially on eastern Long Island,” said Robert Sinclair Jr., AAA’s New York media relations manager. “The merchants are pretty creative in what they do. They’re pretty slick getting around that surcharge law by saying they give discounts for cash. We’re cognizant of it, and don’t agree with it—it certainly doesn’t seem fair. But there are no federal price controls. The market dictates whether or not they can get away with it.

“There used to be a lag of four to six weeks between crude oil prices going up and the prices at the pumps changing,” continued Mr. Sinclair. “Now, prices [for crude oil] go up on the futures market, and immediately the pump price goes up. They’re charging us for their future expenses on top of charging for their cost-of-doing-business expenses—credit cards. It is guaranteeing their profit. It’s called inventory protection. It’s ludicrous.”

The issue, according to Mr. Sinclair, is that the majority of people don’t care why they are paying extra, all they care about is the bottom line. “The only time we get inundated with complaints is when gas hits $4 per gallon. Universally, that is the price that consumers see as unacceptable, regardless of whether they are paying credit card or cash,” he said.

Claire Rosenzweig, president and CEO of the metro New York Better Business Bureau, said her organization doesn’t have an opinion as to whether the surcharge is ethical, but said she advocates for trust in the marketplace.

“It is about signage and notification,” she said. “If you don’t see signage, then ask. You should know what you are paying for and why. It is always a good practice for businesses to be transparent, though, and clearly label a price as credit or cash.”

In the case of last month’s survey, all South Fork stations charging extra for credit had properly displayed their cash prices with their credit prices below. Only one, the more eastern of the two Hampton Bays Shell stations, had any notification that a selection of debit by the customer would treat the transaction as one made with cash, not credit.

According to Michael J. Fox, executive director of the Gasoline and Automotive Service Dealers of America, the group that successfully lobbied Congress to allow merchants to give discounts for cash, consumers should ask for the cash price of anything—not just gas. “Federal law allows retailers to offer a discount for cash,” Mr. Fox said. “If you change the law, you are penalizing the person who pays with cash. With this method, we are giving people a choice. There are many other businesses that offer cash discounts.”

When asked to name a few businesses that routinely charge different prices depending on the method of payment, Mr. Fox said, “Consumers need to start asking, ‘If I pay with cash, will you discount my bill?’ They’ll be shocked how many will say yes.”

He summarized by saying, “People say they don’t want to pay a service charge? Well, neither do we. Some places pay $15,000 a month on credit card fees.”

One the other hand, Karl Rumph, a Southampton resident, had a question: “If they just stopped accepting credit cards, it would cripple their business—so if they want to accept them, shouldn’t they accept that it comes with a cost?”

When it was relayed to Mr. Fox, he simply replied, “No.

“Some businesses get away with a 1,000-percent markup,” Mr. Fox said in answering Mr. Thiele’s earlier question about credit card charges for gas stations versus restaurants. “Sometimes these fees are even higher than our markup,” he said. “We make about 10 cents on every gallon of gas we sell.”

Numerous gas station owners throughout Southampton and East Hampton towns were contacted in person or by phone, but none wanted to discuss the practice.

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Fred Thiele talks a good line, but for years now, nothing has changed. Do the oil companies contribute to King Shelly Silver's campaigns/patronage mill? Maybe this is the real problem.
By nellie (451), sag harbor on Sep 27, 13 8:08 AM
Its called rearranging the deck chairs on the Titanic. The stations will just raise the price of gasoline and you will pay for it anyway. These are just grandstanding politicians around election time as usual. Fred Thiele has been after east end gas stations for the last decade and nothing has happened. Democrat or republican they are all the same.
By chief1 (2800), southampton on Sep 27, 13 8:27 AM
1 member liked this comment
Sounds like it is about time again for Fed Thiele to make a few appearances in front of the cameras, say a bunch of empty words and then go collect some money.

Thiele is a joke, another empty suit lawyer who can/will say anything to get a vote. When will the people demand real leadership, real representation? No, they just accept men like Fred Thiele, men who would sell their mother out for a dollar.

People complain about the price of gas, you should complain about the taxes ...more
By Conservative Undeground (4), East Hampton on Sep 27, 13 9:01 AM
Inaccurate perceptions of causation IMO.

Ike's so-called Military-Industrial Complex is running the show WAY in the background.

Mr. Thiele and other leaders, including even the Presidents since Ike, are basically powerless to do much except hope that they can budge the ship to accept a slight change of course.

Sad but true IMO.
By PBR (4956), Southampton on Sep 27, 13 9:21 AM
Military CONGESSIONAL Industrial Complex! Just sayin~
By lursagirl (245), southampton on Sep 28, 13 12:23 PM
Should read, "Surcharge" (missing r). Would like to know how some stations use the "debit same price as cash", while credit is more?
By Miss K. (103), East Quogue on Sep 27, 13 9:56 AM
1 member liked this comment
Debit cards dont charge the merchants the same usage fee that credit cards do. Gas doesnt really have a great markup so even losing 3%, what Amex typically takes from the merchant on each sale, can be a lot.
By squeaky (291), hampton bays on Sep 27, 13 10:10 AM
If the gas stations claim that they are offering a discount for cash, then they should advertise the full price, or credit card price, instead of the cash price that lures customers into their stations. The "law" and prosecutors should go after the gas stations on the basis of "bait and switch".

I also am tired of Fred Thiele's raisng this issue all the time and being totally ineffective about it. To those who complain about him, I say give us a credible candidate we can therefore vote ...more
By V.Tomanoku (790), southampton on Sep 27, 13 11:37 AM
1 member liked this comment
I've actually had the experience where a station tried to charge my debit card the credit price.

Got back in my car, and drove away.
By Mr. Z (11847), North Sea on Sep 27, 13 12:56 PM
If Fred was truly interested in saving us money at the pump he would actively sponsor legislation changing all taxes on fuels to a per gallon flat tax rather than a percentage of the selling price. Why should the state profit from the profiteering of the oil companies?
By VOS (1241), WHB on Sep 27, 13 1:10 PM
The extra charge for credit cards is complete bs. I own a small business and I must eat the cc charges when my clients pay with their cards. It is illegal for me to charge the clients for that fee - even if it is their choice to pay by credit. It should also be illegal for gas stations.
By dagdavid (646), southampton on Sep 27, 13 1:27 PM
1 member liked this comment
It is illegal.

It's the "cash discount loophole" which is apparently "legal".

A load of horse puckey? You betcha'...
By Mr. Z (11847), North Sea on Sep 27, 13 3:03 PM
Article is incorrect. The Getty Station in East Hampton charges more for credit as does Empire.
By Terbob (3), Springs on Sep 27, 13 2:12 PM
1 member liked this comment
In EH Royal on N Main St charges more also..
By gansetteer (125), east hampton on Sep 29, 13 1:02 PM
This practice is not unique to Long Island and its not illlegal, the Mastercard/Visa Association used to have rules against it but a lawsuit put an end to that.
By pstevens (406), Wilmington on Sep 27, 13 3:17 PM
This argument comes up every year. And every year, all the politicians say they "will look into it", "form a fact finding committee", "create an East End Gasoline Task Force" or some other textbook politicians reply.

And what comes out of anything they do? NOTHING!!!!

This has been going on for years and will continue in the foreseeable future. Unfortunately
By itsamazing (224), Southampton on Sep 27, 13 3:24 PM
"Numerous gas station owners throughout Southampton and East Hampton towns were contacted in person or by phone, but none wanted to discuss the practice."
What does that tell you? They do because they can. Saying that they only make .10 a gallon is absurd especially on the East End. Do I know what the spread is? Nope! Apparently it's a secret.
By Tuckahoe Ted (53), southampton on Sep 27, 13 5:11 PM
I think the best solution we can hope for is to be informed as to whether or not the price on the billboard is cash or credit BEFORE we turn in.

I don't care if they offer a cash discount (go to the ATM before you fill up).

What does bother me is $3.59 in 8" tall numbers and "CASH" in 2" tall letters next to the price. I don't drive with binoculars, so by the time I realized I've been duped I've already turned in.

By simply requiring that the word "CASH" be present next ...more
By diy_guy (101), Southampton on Sep 28, 13 7:39 AM
2 members liked this comment
According to the credit card agreements merchants make with them it is forbidden to charge extra on cc transaction yet they never enforce it. Why?
By lursagirl (245), southampton on Sep 28, 13 12:25 PM
No extra charge for CC.

Discount for cash.

Go Figure!
By PBR (4956), Southampton on Sep 28, 13 2:20 PM