Senate Study Bill 3193



                                    SENATE FILE       
                                    BY  (PROPOSED COMMITTEE ON
                                        WAYS AND MEANS BILL BY
                                        CHAIRPERSON BOLKCOM)

                                         A BILL FOR

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



  1  1    Section 1.  NEW SECTION.  424A.1  Definitions.
  1  2    As used in this chapter, unless the context otherwise
  1  3 requires:
  1  4    1.  "Electronic payment transaction" means a transaction
  1  5 in which a person uses a debit card, credit card, or other
  1  6 payment code or device, issued or approved through a payment
  1  7 card network to debit an asset account or use a line of
  1  8 credit, whether authorization is based on signature, personal
  1  9 identification number, or other means.
  1 10    2.  "Interchange fee" means any fee established, charged,
  1 11 or received by a payment card network for the purpose of
  1 12 compensating the issuer for its involvement in an electronic
  1 13 payment transaction.
  1 14    3.  "Issuer" means any person who issues a debit card or
  1 15 credit card, or the issuer's agent.
  1 16    4.  "Payment card network" means an entity that directly,
  1 17 or through licensed members, processors, or agents, provides
  1 18 the proprietary services, infrastructure, and software that
  1 19 route information and data to conduct debit card or credit
  1 20 card transaction authorization, clearance, and settlement, and
  1 21 that a merchant or seller uses in order to accept as a form of
  1 22 payment a brand of debit card, credit card, or other device
  1 23 that may be used to carry out debit or credit transactions.
  1 24    5.  "Settlement" means the transfer of funds from a
  1 25 customer's account to a seller or merchant upon electronic
  1 26 submission of finalized sales transactions to the payment card
  1 27 network.
  1 28    Sec. 2.  NEW SECTION.  424A.2  Interchange fees  == limitation.
  1 29    The amount of any tax or fee imposed by state or local
  1 30 government that is calculated as a percentage of an electronic
  1 31 payment transaction amount and listed separately on the payment
  1 32 invoice or other demand for payment, or the amount of any
  1 33 fuel taxes imposed under chapter 452A, shall be excluded from
  1 34 the amount of an interchange fee charged for that electronic
  1 35 payment transaction.
  2  1    Sec. 3.  NEW SECTION.  424A.3  Circumvention prohibited.
  2  2    It shall be unlawful to alter or manipulate the computation
  2  3 and imposition of interchange fees by increasing the rate or
  2  4 amount of fee applicable to or imposed upon that portion of an
  2  5 electronic payment transaction not attributable to a state or
  2  6 local tax or fee to circumvent the effect of section 424A.2.
  2  7    Sec. 4.  NEW SECTION.  424A.4  Deduction or rebate ==
  2  8 settlement procedure.
  2  9    A payment card network shall either deduct the amount of
  2 10 any tax or fee imposed as described in section 424A.2 from the
  2 11 calculation of interchange fees specific to each form or type
  2 12 of electronic payment transaction at the time of settlement
  2 13 or shall rebate an amount of interchange fee proportionate
  2 14 to the amount attributable to the tax or fee. The deduction
  2 15 or rebate shall occur at the time of settlement when the
  2 16 merchant or seller is able to capture and transmit tax or fee
  2 17 amounts relevant to the sale at the time of sale as part of the
  2 18 transaction finalization.  If the merchant or seller is unable
  2 19 to capture and transmit tax or fee amounts relevant to the sale
  2 20 at the time of sale, the payment card network shall accept
  2 21 proof of tax or fee amounts collected on sales subject to an
  2 22 interchange fee upon the submission of sales data by the seller
  2 23 or merchant and shall promptly credit the merchant or seller's
  2 24 settlement account.
  2 25    Sec. 5.  NEW SECTION.  424A.5  Enforcement == penalty.
  2 26    1.  The provisions of this chapter are subject to the powers
  2 27 and authority of the attorney general or the attorney general's
  2 28 designee.
  2 29    2.  If a court finds in an action brought by the attorney
  2 30 general, or the attorney general's designee, that a person
  2 31 has intentionally violated a provision of this chapter, the
  2 32 person shall be subject to a civil penalty of not less than
  2 33 one thousand dollars nor more than five thousand dollars for
  2 34 each violation.  In addition, a person paying interchange fees
  2 35 imposed in violation of this chapter may bring an action at law
  3  1 to recover actual damages.  The court may order such equitable
  3  2 relief as it deems necessary, including temporary and permanent
  3  3 injunctive relief.
  3  4    Sec. 6.  NEW SECTION.  424A.6  Nonseverability.
  3  5    In the event that any provision of this chapter or its
  3  6 application is held to be invalid with regard to a federally
  3  7 chartered bank or other financial institution, it shall be
  3  8 held equally invalid with regard to a financial institution
  3  9 licensed by or operating within this state, and to this end the
  3 10 provisions of this chapter are not severable.
  3 11    Sec. 7.  NEW SECTION.  537C.1  Interchange fees ==
  3 12 computation.
  3 13    The computation of an interchange fee established, charged,
  3 14 or received by a payment card network for the purpose of
  3 15 compensating the issuer for its involvement in an electronic
  3 16 payment transaction, as those terms are defined in section
  3 17 424A.1, shall be governed by the provisions of chapter 424A.
  3 18    Sec. 8.  APPLICABILITY.  This Act is applicable to electronic
  3 19 payment transactions processed on or after July 1, 2012.
  3 20                           EXPLANATION
  3 21    This bill prohibits the imposition of interchange fees on
  3 22 specified portions of electronic payment transactions.
  3 23    The bill contains several definitions.  The bill defines an
  3 24 "electronic payment transaction" to mean a transaction in which
  3 25 a person uses a debit card, credit card, or other payment code
  3 26 or device, issued or approved through a payment card network
  3 27 to debit an asset account or use a line of credit, whether
  3 28 authorization is based on signature, personal identification
  3 29 number, or other means.  The bill defines an "interchange fee"
  3 30 to mean any fee established, charged, or received by a payment
  3 31 card network for the purpose of compensating the issuer for
  3 32 its involvement in an electronic payment transaction.  The
  3 33 bill defines an "issuer" to mean any person who issues a debit
  3 34 card, credit card, or the issuer's agent.  The bill defines
  3 35 "payment card network" to mean an entity that directly, or
  4  1 through licensed members, processors, or agents, provides
  4  2 the proprietary services, infrastructure, and software that
  4  3 route information and data to conduct debit card or credit
  4  4 card transaction authorization, clearance, and settlement, and
  4  5 that a merchant or seller uses in order to accept as a form of
  4  6 payment a brand of debit card, credit card, or other device
  4  7 that may be used to carry out debit or credit transactions.
  4  8 The bill defines "settlement" to mean the transfer of funds
  4  9 from a customer's account to a seller or merchant upon
  4 10 electronic submission of finalized sales transactions to the
  4 11 payment card network.
  4 12    The bill provides that the amount of any tax or fee imposed
  4 13 by state or local government that is calculated as a percentage
  4 14 of the payment amount and listed separately on the payment
  4 15 invoice or other demand for payment, or the amount of any
  4 16 state fuel taxes imposed, shall be excluded from the amount
  4 17 of an interchange fee charged for the purpose of completing
  4 18 an electronic payment transaction.  The bill provides that it
  4 19 shall be unlawful to alter or manipulate these provisions by
  4 20 increasing the rate or amount of fee applicable to or imposed
  4 21 upon that portion of an electronic payment transaction not
  4 22 attributable to a state or local tax or fee.
  4 23    The bill's provisions are subject to the powers and
  4 24 authority of the attorney general or the attorney general's
  4 25 designee. The bill provides for a civil penalty if a person
  4 26 has intentionally violated the bill's provisions of not
  4 27 less than $1,000 nor more than $5,000 for each violation.
  4 28 Additionally, the bill provides that a person paying
  4 29 interchange fees imposed in violation of this chapter may
  4 30 bring an action at law to recover actual damages, and that the
  4 31 court may order such equitable relief as it deems necessary,
  4 32 including temporary and permanent injunctive relief.
  4 33    The bill specifies procedures for exclusion of taxes or fees
  4 34 from the computation of interchange fees.  The bill provides
  4 35 that a payment card network shall either deduct the amount
  5  1 of any tax or fee from the calculation of interchange fees
  5  2 specific to each form or type of electronic payment transaction
  5  3 at the time of settlement, or rebate an amount of interchange
  5  4 fee proportionate to the amount attributable to the tax or fee.
  5  5 The bill provides that the deduction or rebate shall occur at
  5  6 the time of settlement when the merchant or seller is able to
  5  7 capture and transmit tax or fee amounts relevant to the sale
  5  8 at the time of sale as part of the transaction finalization.
  5  9 In the event that the merchant or seller is unable to capture
  5 10 and transmit tax or fee amounts relevant to the sale at the
  5 11 time of sale, such as when the tax or fee is collected at the
  5 12 wholesale level or when a credit or debit card terminal is
  5 13 incapable of capturing and transmitting tax or fee amounts,
  5 14 the bill provides that the payment card network shall accept
  5 15 proof of tax or fee amounts collected on sales subject to
  5 16 an interchange fee upon the submission of sales data by the
  5 17 seller or merchant and promptly credit the merchant or seller's
  5 18 settlement account.
  5 19    The bill provides that in the event that any provision
  5 20 contained in the bill or its application is held to be invalid
  5 21 with regard to a federally chartered bank or other financial
  5 22 institution, it shall be held equally invalid with regard to a
  5 23 financial institution licensed by or operating within Iowa.
  5 24    The bill includes a provision in Title XIII of the Code,
  5 25 governing commerce, indicating that the computation of an
  5 26 interchange fee established, charged, or received by a payment
  5 27 card network for the purpose of compensating the issuer for
  5 28 its involvement in an electronic payment transaction shall be
  5 29 governed by the provisions of Code chapter 424A, as created in
  5 30 the bill.
  5 31    The bill is applicable to electronic payment transactions
  5 32 processed on or after July 1, 2012.
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