New York Senator Pushes Legislation to Protect Small Businesses from Credit Card Fee Overcharges

In a move to shield New York’s small businesses from what he calls “unfair and predatory” credit card processing fees, State Senator James Skoufis has introduced legislation that would prohibit credit card companies from applying interchange fees to state and local sales taxes as well as customer tips.

The proposed bill, which mirrors a recently passed law in Illinois, targets the 2%–3% swipe fees levied by credit card companies on every transaction. According to Senator Skoufis, the issue lies in the scope of those fees — they’re currently applied not only to the cost of the goods or services sold but also to the tax and tip amounts, costs that ultimately aren’t retained by the business.

“Why should our mom-and-pop stores be paying a fee to a credit card company on a tax that the government imposes, not the business?” Skoufis said during an interview. “This is a straightforward fix with a massive financial impact.”

$1 Billion in Fees on the Backs of Small Businesses

According to estimates cited by the senator, New York’s small businesses collectively pay approximately $1 billion annually in fees tied to sales tax and tips alone. The proposed legislation would eliminate that cost — without any expenditure from the state.

“This bill will save small businesses across New York a billion dollars a year — money that should stay in our communities instead of padding the profits of big banks and credit card companies,” Skoufis said.

For individual businesses, the impact could be significant, particularly for restaurants, barber shops, and other Main Street operations that handle hundreds of transactions daily. Skoufis noted that for many, the annual savings could total thousands, even tens of thousands, of dollars.

Bipartisan Support, Limited Time

With the legislative session drawing to a close and the state budget already weeks overdue, Skoufis is racing against the clock to move the bill through both chambers. He expressed confidence that the State Senate will pass it, citing strong interest from fellow lawmakers who see the benefits for their constituents.

“This isn’t a regional issue. Every district has small businesses struggling to stay afloat,” he said. “This legislation helps keep their doors open — and it doesn’t cost the state a nickel.”

Assemblymember John McDonald is sponsoring the bill in the lower chamber, and Skoufis said both he and McDonald are working urgently to secure passage before lawmakers break for summer recess.

Raising Consumer Awareness

While business owners are well aware of the financial toll, the average consumer may be in the dark. Skoufis hopes that increased media attention will help educate the public and pressure lawmakers to act.

“Before learning about this issue, I didn’t know it was happening,” Skoufis admitted. “Most people don’t. But every time a consumer tips at a restaurant or pays sales tax, that small business is losing money to the credit card companies. That’s not fair.”

Calls for Federal Action

As more states consider similar legislation, Skoufis believes the federal government should take up the issue. However, he expressed skepticism about the current political climate in Washington.

“The federal government should absolutely be cracking down on this and other anti-consumer practices,” he said. “But until that happens, it’s up to states like New York to step in and lead.”

Enforcement and Compliance

Skoufis also emphasized that the legislation wouldn’t cost the state anything to implement. Enforcement would rely largely on businesses reporting non-compliance, and he expressed confidence that credit card companies — well-staffed with legal teams — would comply.

“These companies have no choice but to follow the law. And if they don’t, they’ll face complaints and penalties. That’s a risk I believe they’ll avoid,” he said.

With a matter of weeks left in the legislative session, all eyes are now on Albany to see whether the bill can make it across the finish line.

Story by: Shantel Destra/New York Public News Network

Image Credit: Freepik