Credit Cards: Charging Into the Future of Rental Payments?
July 26th, 2017 | By: Stephanie Blumenau, Esq.
Electronic payments are used for many transactions in modern day life. It seems obvious then, that credit cards could also be used to pay rent. There is a growing trend of landlords considering accepting rent payments via credit card and some are even investing in software that allows tenants to pay online. Others are contemplating systems to allow for direct payments such as Automated Clearing House (“ACH”) or bank wire transfers. Some however, prefer more familiar payment methods such as certified checks or money orders.
Accepting credit card payments can be a great customer service incentive because of the ease and convenience it offers to tenants. Likewise, landlords benefit from the immediate availability and reliability of payment. Additionally, electronic payments allow both landlords and tenants to easily document the transaction. So, no more debating when rent was placed into a drop box or tracing a missing money order! However, with convenience comes responsibility.
Specifically, when it comes to surcharges, landlords must not be tempted to charge any more fees than is allowed. Most merchant service agreements between businesses and credit card providers incorporate terms that apply a surcharge for every credit card transaction. Historically, per these agreements, the surcharges could not be passed on to the consumer. However in 2013, a class action lawsuit – brought in federal court by approximately 12 million merchants against Visa and MasterCard to remove the prohibition on customer surcharging – was settled after more than a decade of litigation.
Despite settlement, some merchants were not satisfied and the litigation remains open on appeal. Also, in 2013 and after the initial settlement, the Michigan Attorney General issued a Consumer Alert that followed the terms in the settlement which then allowed Michigan merchants to pass the surcharges on to the consumer. The reasoning behind the Alert was because Michigan had no law prohibiting the practice. However, the applicability of the Alert is unclear given the status of the litigation. At this point, until the class action is resolved, merchants (landlords) should refer to their individual merchant service agreements with the credit card providers to determine if assessing a surcharge is allowed.
It is also important to note that, as with any other tenant obligation, landlords and property managers should include a provision in the lease agreement pertaining to any surcharges that are being passed along to the tenant. Further, be aware that excessive surcharges, such as charging an additional administrative processing fee, can be reported to the credit card company. Thus, you risk losing the ability to handle these transactions and subjecting yourself to consumer protection liability.
The Bottom Line: The prospect of allowing credit card payments can be mutually convenient for the landlord and tenant. However, you need to ensure that you adhere to your merchant services agreement as to any surcharges you intend to pass along. Otherwise, you risk charging into a situation that could cost you more than you bargained for.
 In re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., 827 F.3d 223, 2016 U.S. App. LEXIS 12047, 2016-2 Trade Cas. (CCH) P79,680 (2d Cir. June 30, 2016)
 Consumer Alert, Office of the Attorney General, located at http://www.michigan.gov/ag/0,4534,7-164-17337_20942-302574–,00.html