Consumer Federation of California

A South Bay lawmaker introduced legislation Tuesday that would stop California retailers from charging customers extra fees for using debit cards.

Sen. Jenny Oropeza, D-Redondo Beach, said she introduced Senate Bill 933 to protect consumers during difficult economic times.

"Regardless of whether you’re buying milk for the kids or gas for the car, having an additional fee piled on just for using your own debit card is unconscionable," Oropeza said.

California and nine other states have prohibitions against additional charges for credit card purchases; however, no such laws exist for debit cards.

"We want to extend that same protection to people who use their debit cards," Oropeza said in an interview. "It just seems like a fairness issue."

David Haithcock, the executive director of Newport Beach-based California Independent Bankers, said the retailers will tack on the surcharge to defray bank processing fees.

"Banks use that (fee) to enhance fraud detections and to actually administer the program so that they can offer and accept debit cards," Haithcock added.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., predicted that the savings to consumers will depend on how frequently they use their debit cards, but that it would likely be "minimal."

"But on the other side," Kyser added, "What does this do to the retailer?"

Many businesses are also struggling, he said.
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"For a lot of smaller retailers, this will not be good news," Kyser said.

Oropeza said that, since 2005, credit or debit cards have been used in more than half of the nation’s purchases. Since 2006, debit cards have been used more than credit cards for making purchases, she said.

"There’s a way that we can encourage living in one’s means," Oropeza said.

Her legislation is backed by groups including the Consumer Federation of California and the Consumers Union, the nonprofit publisher of Consumer Reports.

Michelle Jun, a Consumers Union staff attorney in San Francisco, said Oropeza’s bill will help consumers at a time when they are using debit cards to be more financially responsible.

"They should not be made to pay an extra fee for using a debit or prepaid card," Jun added.