Credit card transaction fees: tax payments: Consumer Inflation Reduction and Tax Fairness Act.

Assembly Member Ortega's Consumer Inflation Reduction and Tax Fairness Act proposes new regulations prohibiting financial institutions from charging interchange fees on tax portions of electronic payment transactions. The legislation adds Division 25.5 to California's Financial Code, establishing requirements for merchants, payment networks, and financial institutions regarding the handling of tax amounts in credit and debit card transactions.

Under the proposed rules, merchants who provide tax amount data during transaction authorization or settlement processes would be exempt from interchange fees on those tax portions. Merchants who do not initially transmit tax data may submit documentation within 180 days to receive credit for interchange fees charged on tax amounts. Payment networks and financial institutions must process these credits within 30 days of receiving proper documentation.

The bill includes provisions to prevent circumvention of these requirements, prohibiting payment networks and financial institutions from manipulating fee calculations or increasing rates to offset the excluded tax portions. Violations would be subject to enforcement under California's Unfair Competition Law, with courts considering factors such as control over tax data and implementation of compliant processes when determining liability. The legislation maintains existing protections for payment networks regarding merchant-provided tax data accuracy while establishing a framework for proper fee assessment and merchant reimbursement.