HSB 666 (LSB 5515YC (1) 84)

HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS)

A BILL FOR

An Act relating to electronic payment transactions by prohibiting the collection of interchange fees on specified taxes and fees, providing penalties, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  424A.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Electronic payment transaction” means a transaction in which a person uses a debit card, credit card, or other payment code or device, issued or approved through a payment card network to debit an asset account or use a line of credit, whether authorization is based on signature, personal identification number, or other means. 
   2.  “Interchange fee” means any fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction.
   3.  “Issuer” means any person who issues a debit card or credit card, or the issuer’s agent.
   4.  “Payment card network” means an entity that directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and data to conduct debit card or credit card transaction authorization, clearance, and settlement, and that a merchant or seller uses in order to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out debit or credit transactions. 
   5.  “Settlement” means the transfer of funds from a customer’s account to a seller or merchant upon electronic submission of finalized sales transactions to the payment card network.
    Sec. 2.  NEW SECTION.  424A.2  Interchange fees —— limitation.
   The amount of any tax or fee imposed by state or local government that is calculated as a percentage of an electronic payment transaction amount and listed separately on the payment invoice or other demand for payment, or the amount of any fuel taxes imposed under chapter 452A, shall be excluded from the amount of an interchange fee charged for that electronic payment transaction.
    Sec. 3.  NEW SECTION.  424A.3  Circumvention prohibited.
   It shall be unlawful to alter or manipulate the computation and imposition of interchange fees by increasing the rate or amount of fee applicable to or imposed upon that portion of an electronic payment transaction not attributable to a state or local tax or fee to circumvent the effect of section 424A.2.
    Sec. 4.  NEW SECTION.  424A.4  Deduction or rebate —— settlement procedure.
   A payment card network shall either deduct the amount of any tax or fee imposed as described in section 424A.2 from the calculation of interchange fees specific to each form or type of electronic payment transaction at the time of settlement or shall rebate an amount of interchange fee proportionate to the amount attributable to the tax or fee. The deduction or rebate shall occur at the time of settlement when the merchant or seller is able to capture and transmit tax or fee amounts relevant to the sale at the time of sale as part of the transaction finalization. If the merchant or seller is unable to capture and transmit tax or fee amounts relevant to the sale at the time of sale, the payment card network shall accept proof of tax or fee amounts collected on sales subject to an interchange fee upon the submission of sales data by the seller or merchant and shall promptly credit the merchant or seller’s settlement account.
    Sec. 5.  NEW SECTION.  424A.5  Enforcement —— penalty.
   1.  The provisions of this chapter are subject to the powers and authority of the attorney general or the attorney general’s designee.
   2.  If a court finds in an action brought by the attorney general, or the attorney general’s designee, that a person has intentionally violated a provision of this chapter, the person shall be subject to a civil penalty of not less than one thousand dollars nor more than five thousand dollars for each violation. In addition, a person paying interchange fees imposed in violation of this chapter may bring an action at law to recover actual damages. The court may order such equitable relief as it deems necessary, including temporary and permanent injunctive relief.
    Sec. 6.  NEW SECTION.  424A.6  Nonseverability.
   In the event that any provision of this chapter or its application is held to be invalid with regard to a federally chartered bank or other financial institution, it shall be held equally invalid with regard to a financial institution licensed by or operating within this state, and to this end the provisions of this chapter are not severable.
    Sec. 7.  NEW SECTION.  537C.1  Interchange fees —— computation.
   The computation of an interchange fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction, as those terms are defined in section 424A.1, shall be governed by the provisions of chapter 424A.
    Sec. 8.  APPLICABILITY.  This Act is applicable to electronic payment transactions processed on or after July 1, 2012.
EXPLANATION
   This bill prohibits the imposition of interchange fees on specified portions of electronic payment transactions.
   The bill contains several definitions. The bill defines an “electronic payment transaction” to mean a transaction in which a person uses a debit card, credit card, or other payment code or device, issued or approved through a payment card network to debit an asset account or use a line of credit, whether authorization is based on signature, personal identification number, or other means. The bill defines an “interchange fee” to mean any fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction. The bill defines an “issuer” to mean any person who issues a debit card, credit card, or the issuer’s agent. The bill defines “payment card network” to mean an entity that directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and data to conduct debit card or credit card transaction authorization, clearance, and settlement, and that a merchant or seller uses in order to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out debit or credit transactions. The bill defines “settlement” to mean the transfer of funds from a customer’s account to a seller or merchant upon electronic submission of finalized sales transactions to the payment card network.
   The bill provides that the amount of any tax or fee imposed by state or local government that is calculated as a percentage of the payment amount and listed separately on the payment invoice or other demand for payment, or the amount of any state fuel taxes imposed, shall be excluded from the amount of an interchange fee charged for the purpose of completing an electronic payment transaction. The bill provides that it shall be unlawful to alter or manipulate these provisions by increasing the rate or amount of fee applicable to or imposed upon that portion of an electronic payment transaction not attributable to a state or local tax or fee.
   The bill’s provisions are subject to the powers and authority of the attorney general or the attorney general’s designee. The bill provides for a civil penalty if a person has intentionally violated the bill’s provisions of not less than $1,000 nor more than $5,000 for each violation. Additionally, the bill provides that a person paying interchange fees imposed in violation of this chapter may bring an action at law to recover actual damages, and that the court may order such equitable relief as it deems necessary, including temporary and permanent injunctive relief. 
   The bill specifies procedures for exclusion of taxes or fees from the computation of interchange fees. The bill provides that a payment card network shall either deduct the amount of any tax or fee from the calculation of interchange fees specific to each form or type of electronic payment transaction at the time of settlement, or rebate an amount of interchange fee proportionate to the amount attributable to the tax or fee. The bill provides that the deduction or rebate shall occur at the time of settlement when the merchant or seller is able to capture and transmit tax or fee amounts relevant to the sale at the time of sale as part of the transaction finalization. In the event that the merchant or seller is unable to capture and transmit tax or fee amounts relevant to the sale at the time of sale, such as when the tax or fee is collected at the wholesale level or when a credit or debit card terminal is incapable of capturing and transmitting tax or fee amounts, the bill provides that the payment card network shall accept proof of tax or fee amounts collected on sales subject to an interchange fee upon the submission of sales data by the seller or merchant and promptly credit the merchant or seller’s settlement account.
   The bill provides that in the event that any provision contained in the bill or its application is held to be invalid with regard to a federally chartered bank or other financial institution, it shall be held equally invalid with regard to a financial institution licensed by or operating within Iowa.
   The bill includes a provision in Title XIII of the Code, governing commerce, indicating that the computation of an interchange fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction shall be governed by the provisions of Code chapter 424A, as created in the bill.
   The bill is applicable to electronic payment transactions processed on or after July 1, 2012.