With the rising cost of credit card processing and looming compliance audits, auto dealers are increasingly turning to third-party partners for surcharging solutions. Amberly Allen, founder and managing partner of Dealer Merchant Services, joins us in today’s episode of Driving Solutions to explain the legal landscape and why doing it wrong could mean serious consequences.
Dealer Merchant Services has grown rapidly in just five years, expanding from a single dealership client to more than 1,000 today. Allen expects that number to double within the next 12 to 18 months as dealers seek legal, compliant solutions to manage credit card transaction fees. Her company specializes exclusively in automotive retail and provides fully compliant surcharge programs that align with federal, state, and card brand regulations.
Currently, 47 states permit compliant surcharge programs, while Connecticut, Massachusetts, and Maine still prohibit them. States like Colorado and California impose additional rules: Colorado caps surcharges at 2%, and California advises dealers not to apply surcharges in the F&I office. The national surcharge limit remains at 3%, and Allen emphasizes that dealers cannot legally profit from surcharges as they are only meant to recover costs.
A key difference between a compliant surcharge program and a cash discount program is that the former only applies the additional charge to credit card users, while the latter increases pricing for both credit and debit card transactions. Cash discounting is not compliant in F&I and can alter the structure of a deal.
“We’ve trained and certified 16,000 dealership employees across the country, specific to a compliance surcharge on the word tracking and the compliance.” – Amberly Allen
To comply, dealerships must display required signage at the cashier and entry points, use a certified third-party processor, and never apply surcharges to debit cards. Dealer Merchant Services uses technology that automatically identifies debit cards through a bin range identifier, ensuring no surcharge is incorrectly applied. Staff training is also provided to support customer communication and reduce CSI risks.
Allen explains that her team helps clients analyze current processing statements to estimate savings and runs post-launch comparisons to validate those projections. She notes that many dealers are unknowingly losing money to “interchange padding,” or the hidden fees buried in lengthy credit card processing statements.
Unlike generalist payment processors, Allen’s firm tailors its platform for dealership operations, offering integrations with DMS platforms, customized reporting, and comprehensive accounting support. Their 93-item implementation checklist ensures smooth execution across all departments, from IT to accounting.
Dealer Merchant Services has worked with hundreds more stores than its closest competitor, thanks largely to referrals from satisfied clients. As regulatory enforcement becomes more aggressive, Allen says her company is also helping dealers unwind non-compliant surcharge setups and avoid costly fines or operational disruptions.
For dealers still hesitant to pass fees along to customers, Allen notes that most clients typically start with F&I, where there is often less customer resistance, and gradually expand.
As surcharging regulations become more complex and enforcement intensifies, Allen stresses the importance of doing things the right way from the outset. With more than 17,000 U.S. dealerships still without a compliant solution, she believes the company is just getting started.
