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O'Fallon staff reviews credit‑card convenience fees after $388K in processing costs; council OKs staff to negotiate contracts
Summary
City staff explained legal requirements and tradeoffs of surcharges vs convenience fees, reported the city paid about $388,000 in card fees over the last 12 months, and council authorized staff to explore contracts and return with a recommended resolution.
City finance staff presented to the O'Fallon City Council on Dec. 18 about city credit‑card processing costs and legal options to recover those costs through surcharges or convenience fees.
Vicky (city finance staff) explained the difference between a surcharge (a fee applied for using a credit card in any channel) and a convenience fee (a fee for an alternate payment channel, such as paying online). She said Missouri law and federal/card‑network rules require disclosure prior to a transaction and a separate line item on receipts. "Missouri State statute 408.140 talks about a convenience fee and the disclosure," she said, and noted federal rules and the card brands’ own caps: federal law permits up to 4% for a surcharge but Visa/Mastercard/Discover typically cap at about 3%.
Vicky told the council the city paid about $388,000 in credit‑card fees on a rolling 12‑month basis and summarized the city’s merchant accounts and payment channels (city‑hall point‑of‑sale, online utility billing, licensing portal, recreation module, and MOTO/automatic billing). She said implementation would require a consistent approach across accounts, disclosure to card brands and customer notice.
Council members asked whether fees should apply to all accounts and how much of the fees would be recovered. Vicky said the goal would be to cover a majority of fees but that contract negotiations with providers would determine the final structure and that some processing or chargeback fees might remain. Council members asked whether city action should be a resolution or a budget amendment; staff preferred returning with a recommended resolution after negotiating terms.
After discussion the council indicated support for the concept and for staff to negotiate with merchant providers and return with contract terms and a proposed resolution for formal approval. Several council members signaled a preference to apply fees across the board rather than selectively.
