Credit Card Processing Compliance: What Every Merchant Needs to Know

Your business relies on credit card payments to collect revenue. Failing to follow the rules of credit card processing can mean those payments stop, reducing your cash flow. Your business can also face unexpected legal consequences because of compliance violations, from fines to lawsuits.

Risk assessment and compliance review for credit card processing is the best defense against a potential business interruption. You can start today by following a basic checklist to stay in step with the rules. 

Why Compliance Matters in Credit Card Processing

Merchants face big consequences if they neglect their credit card processing compliance. Fines, chargebacks, merchant account termination, and even lawsuits might result.

Compliance is, therefore, a high-stakes affair. Unfortunately, it’s also increasingly complex. Merchants have to consider the ever-changing federal laws, card brand rules, and state laws. In fact, two states, Illinois and Colorado, just passed legal changes that have a direct impact on credit card processing. 

Hiring a lawyer to keep you up to speed can save your business. An experienced attorney can ensure you know the rules and have the right procedures in place to follow them.

What Is Credit Card Processing Compliance?

Compliance involves making sure that your credit card practices align with laws, regulations, and card network requirements for every transaction you process.

The main pillars of compliance are:

• Payment Card Industry Data Security Standards (PCI DSS): Merchants must use technology and processes that meet standards set by the PCI Security Standards Council. 
• Visa, Mastercard, and Amex Rules: Card brands, including the big three, set limits on things like surcharges. 
• State and Federal Legislation: State and federal laws can forbid or limit some merchant processing activities. They also impose certain obligations, such as surcharge disclosures to consumers.

Key Areas of Compliance for Merchants

Compliance impacts all aspects of credit card processing, including which charges you can pass on to your customer. Some of the key compliance areas include: 

• PCI DSS Requirements: Customer data, including credit card information, must be secure and protected at all stages of processing. The level of adequate data security is set by an industry-wide authority.  
• Surcharge Compliance: Some states, including Illinois and Colorado, permit merchants to pass a credit card processing fee to customers. However, those same states can also impose a maximum surcharge amount and mandate that the surcharge be visible to the customer. 
• Dual-Pricing Programs: Federal law allows businesses to offer customers a discount when paying in cash instead of with a credit card. This is different from a surcharge, where the customer pays a credit card fee on top of the purchase amount. For cash discounting programs to be legal, merchants have to take specific steps, including informing card brands in advance about your intent to offer a cash discount. 
• Consumer Protection Laws: Merchants cannot use deceptive practices when taking payments from customers. They generally must be transparent about fees under federal and state consumer protection laws. Failing to disclose credit card surcharges may be deceptive according to these laws. 

The Legal Risks of Non-Compliance

Merchants who fail to meet these rules face:

• Fines
• Merchant Account Closures
• Lawsuits

If a merchant fails to follow card brand rules, the brand can close their merchant account, and it’s not always easy to get it reopened. This restricts the type of payments a merchant can accept, resulting in lower revenue.

The state attorneys general also file lawsuits against credit card companies and merchants in the name of consumers. This can cost a merchant hefty legal fees and damage its reputation. 

Fines can be the result of a penalty in a processing contract with a card brand or imposed by a state or federal authority.

State-Specific Surcharge Laws: Illinois & Colorado

Illinois and Colorado have made recent and significant changes to credit card surcharges.

• Illinois: A new law prevents credit card companies from charging merchants a fee for the tax and gratuity portion of a transaction. Once this law is in place in 2026, it may impact the amount of surcharge merchants can pass on to consumers. In this state, surcharges are legal, but not disclosing the surcharge is a deceptive practice. 
• Colorado: Surcharges up to a maximum of 2% are now legal in Colorado, but merchants must disclose this fee to customers.

These new laws complicate things for multi-state merchants who might now have to determine a surcharge amount and disclosure on a case-by-case basis depending on the jurisdiction.

How Merchants Can Stay Compliant

Here’s what merchants can do now to stay compliant:

• Post visible signage about cash discount programs
• Fully disclose fees and surcharges
• Charge fees within the legal limit
• Register cash discount programs with card brands where required
• Use a legal structure for cash discounts
• Get PCI DSS validation annually

Legal counsel helps merchants maintain compliance by reviewing current practices as part of reviews and audits. As a merchant, you need to know where you do business and how you handle credit card processing; your lawyer can tell you how to tweak your practices to get in compliance and stay there.

Do You Need a Credit Card Processing Compliance Attorney?

Merchants who face a complex regulatory environment should talk to a compliance lawyer. Seek legal help if you are:

• Expanding your business across states or across multiple jurisdictions
• Facing chargebacks or surcharge disputes
• Subject to a regulatory investigation

Global Legal helps merchants mitigate risk and stay compliant. We can help you develop risk defense strategies that are specific to the unique needs of your individual business.

Conclusion & Call to Action

Compliance is at the core of merchant responsibility and is essential for the continuity of your business. A failure of compliance can cost your business money and damage your reputation. You can also lose a necessary gateway for accepting payments from customers. That means less revenue coming in.

Global Legal is an experienced and reputable law firm with a specific focus on the payments industry. Contact us today for a compliance review to reduce the risk profile of your business.