Bipartisan bill to eliminate some credit card fees for businesses passed by Colorado House

Colorado would become the second state in the country to prohibit credit card companies from charging “swipe fees” on taxes or tips under new legislation that passed the state House on Wednesday.

Every time a customer uses their Visa or Mastercard at a restaurant or store, the credit card companies charge the business a fee that’s typically between 2% and 4% of the total bill. That total includes the cost of sales tax — which businesses say they collect and pass on to the government — and tips, which are given to workers.

House Bill 1282 would prohibit credit card companies from assessing fees on taxes or tips. It would also limit the fees that could be charged for charitable donations.

Though the bill would only limit part of the swipe fees, the charges on taxes and tips still cost businesses thousands of dollars each year, supporters said.

“I just want to state as a Democrat, I think these fees are regressive,” Rep. William Lindstedt, of Broomfield, said from the House floor Wednesday. He’s co-sponsoring the bill with Rep. Max Brooks, a Castle Rock Republican. “I think fees paid on sales tax and tips is a regressive thing, and we need to do better to protect Colorado’s workers and Colorado’s small businesses.”

The measure passed the House 43-21, with support and opposition crossing party lines. If the bill is passed by the state Senate and signed into law by Gov. Jared Polis, Colorado would join only Illinois in prohibiting fees on taxes or tips.

Democrat and Republican lawmakers have been sharply divided on how to address the broader issue of fees this session, and the Democratic majority has also sparred internally about how to best regulate businesses.

But the swipe-fees measure has found itself in unusually chummy waters: It’s simultaneously supported by some prominent business groups, like the National Federation of Independent Businesses and the Colorado Restaurant Association, alongside the far more liberal Bell Policy Center.

Opponents include Mastercard and American Express, plus other business groups like the Denver Metro Chamber of Commerce and the Colorado Competitive Council.

Several airlines are also opposed, in a nod to that industry’s growing presence in the credit card space. According to The Atlantic, United’s MileagePlus program was recently valued at $22 billion — more than double the value of the company’s market cap in the airline industry.

The opposition has been deep: During the bill’s committee vote last week, critics raised a litany of concerns. They promised a swift lawsuit, pointing to litigation trying — and partially succeeding — to block Illinois’ law, and floated fears that everything from airline points to online transactions would be in jeopardy if the bill passed.

Jenifer Waller, of the Colorado Bankers Association, said customers would have to send checks to online retailers to pay their taxes, and others said in-person patrons would be charged once — for whatever service they were buying — and then again, for taxes and tips.

“Specifically, we’re concerned that this legislation would negatively impact popular airline customer reward programs,” added Carly West, of the Denver chamber.

The bill’s supporters rejected those arguments. After the vote Wednesday, Brooks said he doesn’t buy critics’ myriad fears, pointing to existing fee caps in Europe as evidence that limits here won’t be catastrophic.

Brooks essentially said opponents had thrown all they could at the wall, hoping something would stick.

“I can see the arguments of some of the opposition,” he said, “but I don’t believe wholeheartedly in the validity of those concerns.”

Though part of the Illinois law has been temporarily blocked in court, Brooks and Lindstedt said their bill had been crafted to avoid similar pitfalls in Colorado.

“This is what we can do,” Brooks said. “(The bill) was never meant to kick big companies in the shins or to go after big financial institutions. … My personal concern is small businesses.”

The bill now heads to the Senate, where — Brooks and Linstedt said — it faces an uncertain fate and a renewed round of intense opposition.

Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot.