Credit Card Settlement Could Stymie PayPal's Retail Plans

A provision within the hotly contested settlement between merchants and credit card networks could potentially slow PayPal's bid to become more widely accepted at grocery stores, restaurants and other retailers.

That's because under terms of the proposed settlement, retailers may assess a surcharge on consumers who pay with plastic to help offset the cost of processing noncash transactions.

Retailers that choose to do so must assess the surcharge on all types of electronic payments - including PayPal, which currently prohibits merchants from surcharging its clients. And unless terms of the settlement are changed - or PayPal adjusts its no-surcharge policy - retailers would have little choice but to shut PayPal out, attorneys for retailers say.

"The upshot is, if you surcharge Visa and MasterCard then you either must surcharge PayPal the same way... or don't take PayPal." says Douglas Kantor, a lawyer for the National Association of Convenience Stores.

Few industry experts expect larger retailers to assess surcharges because doing so is more likely to turn off buyers than get them to switch to cash. ...

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