What are my rights regarding convenience fees for utilities?
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com. Her book, “The Million-Dollar, One-Person Business,” was released in 2018. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.
My HOA fee is combined with my utility bill and I'm being charged a 5 percent convenience fee to use my card. Is this legal?
While some states have laws capping convenience fees a company can charge, there are exemptions for some businesses, which allows them to charge a higher fee.
Dear Your Business Credit,
I read the CreditCards.com story about credit card convenience fees in California. My condo’s homeowners association (HOA) contracts with PayLease to collect HOA dues, which include each unit’s PG&E utility charge for electricity. If the owner prefers to pay by credit card, PayLease charges a $28+ convenience fee per month, for monthly HOA dues of $540.67, which is over 5 percent(!)
Per the info I just read on your site, this appears to be greater than Visa’s convenience fee allowance in California, which is 4 percent. Also, it seems PayLease’s convenience fee is sliding, based on the unit’s HOA dues versus a fixed fee. If I read correctly on your site, a convenience fee should be a flat rate. Have I interpreted the information correctly? Or perhaps we are still awaiting the impending Supreme Court decision about credit card convenience fees? - Sharon
Ouch. It’s hard not to notice $28 convenience fee!
I ran your question past Jen Lee, an attorney with offices in San Ramon and Tracy, California, who frequently advises clients on debt-related matters and is a co-author of “Preventing Credit Card Fraud: A Complete Guide for Everyone from Merchants to Consumers.”
You may not welcome this news, but apparently, PayLease has the right to charge you and your fellow condo owners the $28 convenience fee.
Companies exempt from caps on convenience fees
“There is an interesting loophole in the law for utilities and public agencies,” Lee noted in an email. “CCP 1748.1, which is part of the statute regarding credit card transactions, Section 1748.1(f), specifically excludes charges for payments to an electrical, gas or water corporation and approved by the Public Utilities Commission.”
Code section, 1748.1 explains: “This section does not apply to charges for payment by credit card or debit card that are made by an electrical, gas or water corporation and approved by the Public Utilities Commission pursuant to Section 755 of the Public Utilities Code.”
So what does this have to do with PayLease?
“If the HOA has a payment service that includes utility payments, then they fit into the loophole and can charge a convenience fee for paying the bill with a credit or debit card,” Lee explained. “When I checked out PayLease’s website, it looks like they offer services to manage HOA, rent, utility bills all on one statement and for one payment, which then allows for the convenience fee for utility payments.”
Tip: Consider bringing the issue to your HOA board to negotiate a lower fee with the utility company.
It is this exemption that allows them to charge the $28 fee for providing the customers with the option of paying the bill by credit card or debit card. As to how high the fee can be, Lee explained, “Under PUC Section 755, the fees have to be approved by the commission for reasonableness.”
It sounds like you have a strong objection to the convenience fee so this may be something worth bringing up at your next condo association meeting. My guess is there are other owners who would enjoy the convenience of paying by credit card without the $28 fee.
Alternatives to paying with a card
In the meantime, if the convenience fee seems burdensome, it might be better to write an old-fashioned check. Many people are switching to electronic payments for their purchases, but writing a check can save you money in cases like this. If you want to do it online, your bank will also likely allow you to send a check through your banking app, which won’t feel much different from charging it to your card.
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