The Watchdog: Are discounted cash prices for gas a violation of Texas law?

State regulators told Dallas Morning News Watchdog columnist Dave Lieber that gas stations offering discounted prices for cash purchases aren’t violating a Texas law that prohibits surcharges for debit- and credit-card purchase.


Tom Thumb changed its gas pricing policy recently, and some Texans say they question whether the new system violates a strengthened state law that prohibits surcharges for purchases made with debit or credit cards.


File 2011/The Associated Press

Robert Gellman of Mansfield alerted me that “Tom Thumb has recently started to charge 10 cents more per gallon for gas that is paid with a credit card.”

He wonders if that’s a credit card surcharge — and a violation. But what Gellman and I learned is that Tom Thumb says it charges 10 cents less for customers who pay with cash or a debit card, so it’s a cash discount downward, rather than a credit card surcharge upward. So it’s not a violation, according to state regulators.

Confusing, right?

Typically, Tom Thumb gas stations advertise the lower cash/debit price on its big monument signs, but once you pull up to the pumps, the listed price is the higher credit card price. Many stores have added smaller signs that show both cash and credit prices. When a debit card is inserted or cash is paid, the price on the pump drops.

Tom Thumb appears to be complying with the state laws about cash, debit and credit card pricing, much to the dismay of some customers who don’t like the pricing system. After several consumer complaints, state regulators gave official approval to Tom Thumb’s pricing plan. Theirs is the only opinion that counts.

Ever since The Watchdog reported that state law was beefed up to place real penalties on merchants who add surcharges for credit or debit card spending, I’ve received complaints about apparent violators. Folks complained about a country club, a dentist’s office and an apartment complex, to cite a few.

There is one huge exception to the law: Governments are exempt. They can add surcharges for using a plastic card to pay tax bills, fees, fines and other charges.

Some businesses try to get away with added fees for credit card use by insisting that the surcharge is a convenience fee for extra services. An apartment complex charges tenants $49.95 a month to pay rent with a credit card and explains that covers the cost of the payment software. At another business, a customer was told that the convenience fee covers the protection of the customer’s personal credit card information.

The state regulator is the Office of Consumer Credit Commissioner. The office has ruled that cash discounts are acceptable but convenience fees are not.

An OCCC official wrote in a letter to a consumer, “A convenience fee may be considered the same as a surcharge when using the credit card. If the club is accepting this ‘convenience fee’ it appears to be the same as a surcharge.”

A law passed last year gave the consumer credit office enforcement powers. In the first four months, no one has been fined. Regulators see themselves as instructional in the beginning, director Rudy Aguilar says. Violators get warning letters now rather than fines. Stay tuned for further action. “Some people have been a little resistant,” Aguilar says.

Tom Thumb’s changes irked some loyal customers. Peggy Taylor of Arlington says, “By charging 10 cents more per gallon for credit cards, you are basically canceling out benefits of earning points.”

Customers lose some protection against fraud when they pay with a debit card rather than a credit card.

Tom Thumb officials told state regulators in a letter I viewed that there are signs posted at the pumps explaining its pricing. Tom Thumb staffers also explained to consumers in letters I saw that the company changed its pricing to ensure that customers who pay with cash or debit cards get the lowest price. The price displayed in front of its stations is the lower cash/debit price. The price on the pump is the credit card price, which is 10 cents higher.

The company allows customers to get the lower cash price by paying with a corporate charge card or Tom Thumb gift card.

Because the higher price shown at the pump is the credit card price and the price then drops, it counts as a cash discount, Tom Thumb officials have written in letters to regulators and customers. Under federal Truth in Lending regulations, cash discounts are allowed. A state can’t change that.

Some Exxon stations display similar pricing but they advertise two prices on the monument signs — a “Regular Cash” price and underneath a higher “Regular Credit” price.

Bottom line: If a business, other than a government, charges more money for using a debit or credit card, that could be a violation. If a business lowers a credit card price when there’s a cash purchase, that’s OK.

Confused? Me too.
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