RELATING TO COMMERCIAL LAW -- GENERAL REGULATORY PROVISIONS --, INTERCHANGE FEES
S2344 creates a new chapter in Rhode Island commercial law governing interchange fees on electronic payment transactions. The bill prohibits an issuer, payment card network, acquirer bank, or processor from charging interchange fees on the portion of a credit or debit card transaction attributable to sales tax, use tax, occupancy tax, excise tax, or gratuities, so long as the merchant provides the tax or gratuity amount during authorization or settlement. If that information is not transmitted at the time of the transaction, the merchant may later submit tax-and-gratuity documentation within 180 days and obtain a refund of the interchange fees charged on those amounts.
The bill also makes it unlawful for payment card industry participants to evade the prohibition by shifting costs to the non-tax portion of the transaction, and it imposes a civil penalty of $1,000 per violating transaction, along with a refund obligation for improperly charged fees. The act is scheduled to take effect on January 1, 2027, and would add new statutory definitions and compliance rules affecting merchants, card networks, processors, and banks operating in Rhode Island.
If enacted, the bill would amend Title 6 of the Rhode Island General Laws by adding Chapter 26.2, creating a state-level restriction on how interchange fees are assessed in card transactions involving taxes and gratuities. It would directly affect merchants that collect and remit taxes, as well as payment card networks, issuers, acquirer banks, and processors that handle card authorization, clearance, settlement, and fee calculation. The measure would require systems capable of identifying tax and gratuity amounts and would create a refund and penalty framework for noncompliance.
The available voting history suggests the bill received favorable committee treatment, with the Senate Committee on Commerce voting 6-0 to hold it for further study. That indicates interest in the proposal and no recorded opposition at that stage, but also that the committee was not ready to advance it immediately. No transcript discussion was provided, so the broader public or stakeholder sentiment cannot be assessed beyond the committee action.
The main policy issue is whether card issuers and networks should be barred from earning interchange fees on amounts that are not part of the merchant’s actual sale, namely taxes and gratuities. Supporters are likely to view the bill as a merchant-cost relief measure that prevents fees from being charged on pass-through amounts, while potential opponents may focus on operational complexity, documentation burdens, and the need to modify payment processing systems. The bill also raises compliance questions about how merchants prove tax or gratuity amounts after the fact and whether fee structures could be adjusted in response, which is why the bill expressly prohibits manipulation of the fee calculation.