Letter to The Honorable Jon Leibowitz, Chairman Federal Trade Commission

Letter

United States Senator Charles E. Schumer asked the Federal Trade Commission (FTC) today to consider rules requiring greater disclosure of gas prices that are posted on gas station road signs so that customers know they could very well have to pay higher prices at the pump when they pull over to use a credit or debit card. Schumer noted that dozens upon dozens of gas stations on Long Island charge two separate prices for a gallon of gas, one for credit card customers and a discounted price for cash-paying customers. While stations are permitted to offer discounts for gas, Schumer stated that drivers often pull over after seeing the cash-only price and wind up surprised that they will have to pay more than the advertised price at the pump when they choose to use a credit card. Schumer also noted that while some stations post small, almost unreadable references to "cash', the signs make no reference to the higher price consumers will be charged if they pay by credit card.

"Drivers shouldn't get sticker shock when they pull over expecting one price and then realize if they pay with their debit card or credit card they are going to pay ten cents more a gallon," said Schumer. "With gas prices 40 cents higher than the same time last year, Long Island drivers are looking for the best price they can find to fill up the tank. That's why the sign posted on the roadside should make it clear to drivers that they may end up paying more at the pump than the advertised price. A tiny, unnoticeable reference to "cash' doesn't tell customers they are going to pay 10 cents more a gallon by using their debit card."

More and more Long Island gas stations have begun offering two distinct prices for gasoline: one price for cash purchases and one price for credit card purchases. Unfortunately for consumers, they only advertise one price to drivers seeking to fill up their tanks. Many consumers are not aware there are higher prices for gas purchased with a credit card until they pull up to the pump. While gas stations are prohibited from raising their prices based on the method of payment, they can offer discounts depending on how a driver pays to fill up their tank. Many gas stations on Long Island offer discounts for cash payments, but only advertise the discounted per gallon cash price on road signs, leaving consumers in the dark about the cost per gallon they will pay if they pull up to the pump without cash. Schumer pointed out that if Long Island drivers were more aware that purchasing gas on a credit card was a more expensive option, they may decide beforehand to use cash.

In a letter to the FTC, Schumer argued that by displaying only the cash based price on road signs, many consumers wind up paying higher fees then they intended to when they pull into the gas station because they only have a credit card of debit card on hand. Often times, consumers don't know they are going to pay a higher price than advertised at the pump until they pull into the station and get out of their car -- at that point, many drivers simply pay the higher price instead of the inconvenience of getting back in the car to search for a cheaper price. Schumer pointed out that if drivers knew they would pay higher prices with their credit or debit cards before they pulled into the stations, they may choose not to use their cards and instead use cash. Greater disclosure would let drivers know that prices differ per payment method and would allow them an opportunity to bargain shop by choosing a station that has all around cheaper prices.

Last week, the Westchester County Legislature passed a bill, sponsored by Legislator Mike Kaplowitz, that requires gas stations to post both prices they charge on road signs, making it clear to drivers that the cost for a credit card purchase is higher than payment with cash. Schumer's call would require the FTC to put in place rules requiring greater disclosure on road signs that paying by credit card will cost more, and would impact Long Island, New York State, and the country.

"Drivers shouldn't be running on empty when it comes to knowing what the real cost of a gallon of gas is before they pull up to the pump," continued Schumer. "I am asking the FTC to provide rules that make it clear to consumers they may well pay more for a credit or debit card purchase than what the large road sign advertises."

Dear Chairman Leibowitz,

I write today to call your attention to a pervasive practice on Long Island that I believe to be deceptive to consumers. Specifically, Long Island gas stations frequently lure customers off the road and to the pump with one advertised "cash" price, and then, without advance warning, charge those consumers up to ten cents per gallon more to pay with a credit card.

Many drivers would choose not to patronize a station if they knew that they would have to pay a higher price to use a credit card. Because the credit card price is not disclosed until the driver has pulled over, waited in line, and is at the pump, however, many drivers cannot take the time to then leave the station and find another service area that does not have tiered pricing.

Drivers shouldn't get sticker shock when they pull over expecting one price and then realize that they are going to pay ten cents more per gallon if they pay with their debit or credit card. I believe the sign posted on the roadside should make it clear to drivers that they may end up paying more at the pump than the advertised price.

The failure to notify customers of the higher credit price happens throughout Long Island, but I'm confident the problem is not confined to New York. Therefore, I ask you to consider utilizing your authority under Section 18 of the FTC Act (15 USC 57(a)) to prescribe industry-wide rules which require more clear disclosure of price differentials for gas stations. Specifically, I believe gas stations should be required to explicitly disclose in their road-side advertisements that the customer may pay more than the advertised price.

If you need any further information, or would like examples of the problem I am describing, please don't hesitate to contact my staff.

Sincerely,

Senator Charles Schumer

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