New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on September 15, 2006, representing the position of the New York State Insurance Department.

Re: Credit Card Service Company

Question Presented:

May an insurance agent or broker conducting business in New York contract with a credit card service provider that will accept an insured’s premium payment by credit card on the agent or broker’s behalf and charge the insured a service fee for the transaction?

Conclusion:

No, an insurance agent or broker conducting business in New York may not contract with a credit card service provider that will accept an insured’s premium payment by credit card on the agent or broker’s behalf and charge the insured a service fee for the transaction.

Facts:

An inquiry was sent to the Department noting that the United States Internal Revenue Service and the New York State Department of Taxes and Finance allow taxpayers to pay their taxes by credit card through the use of a credit card service provider, which charges a fee to the taxpayer for such transaction. It was inquired as to whether an insurance agent or broker conducting business in New York may also use a credit card service provider to collect premiums from its insureds and charge the insureds a service fee for the transaction.

Analysis:

N.Y. Gen. Bus. Law § 518 (McKinney 1996) states:

§ 518.  Credit card surcharge prohibited

No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.

Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed five hundred dollars or a term of imprisonment up to one year, or both.

The Office of Attorney General has stated in its formal opinion No. 2006-F2, with regard to § 518, that:

[A]s long as the sale of insurance can be considered the sale of property or a service, it appears to fall within the plain meaning of the statute. We believe that the purchase of insurance coverage can be considered the purchase of property or a service, and thus that credit card surcharges imposed in connection with the payment of insurance premiums fall within the intended scope of the statute.

Thus, the § 518 prohibition against the imposition of a surcharge (or service fee) applies to insurance agents and brokers. Accordingly, an insurance agent or broker may not impose a service fee upon its insured for paying its premium by credit card, nor may a credit card service provider do so on behalf of the agent or broker for whom it collects the premium.

While it is outside the province of this Department to interpret the General Business Law, it appears to us that the United States Internal Revenue Service and the New York State Department of Taxes and Finance are not subject to N.Y. Gen. Bus. Law § 518 as neither agency is a "seller" under the statute. An inquiry may be sent to the NYS Office of Attorney General, Capitol Building, Albany, NY 12224-0341, or via email at http://www.oag.state.ny.us/online_forms/email_ag.jsp.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.