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AN ACT relating to merchant processing agreements. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 365 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section: 5
(a) "Credit card processor" or "processor": 6
1. Means a person that processes credit card or electronic commerce 7
transactions on behalf of a business for a fee; and 8
2. Includes: 9
a. A merchant services provider; 10
b. A financial institution; 11
c. An independent sales organization; and 12
d. Any subsidiary or affiliate of a person listed in this 13
subparagraph; and 14
(b) "Merchant processing agreement" or "agreement": 15
1. Means a contract between a credit card processor and a business 16
under which the business agrees to pay the credit card processor for 17
processing credit card or electronic commerce transactions on behalf 18
of the business; and 19
2. Includes any gift or sale of equipment or personal property that is 20
made to a business from a credit card processor in connection with an 21
agreement by the cre dit card processor to process credit card or 22
electronic commerce transactions on behalf of the business. 23
(2) Except as provided in subsection (5) of this section, a credit card processor shall 24
not assess or charge a business a fee, fine, or penalty, includ ing liquidated 25
damages, under a merchant processing agreement: 26
(a) That exceeds the greater of the following for terminating the agreement 27
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before the expiration of the term agreed upon by the processor and 1
business: 2
1. Five hundred dollars ($500); or 3
2. The unreimbursed cost of any equipment or other personal property 4
gifted or sold under the agreement; or 5
(b) For failing or declining to: 6
1. Renew the agreement; or 7
2. Enter into a subsequent merchant processing agreement. 8
(3) Except as provided in subsection (5) of this section, a credit card processor shall: 9
(a) Disclose clearly and conspicuously in bold twelve (12) point font the 10
following information on the signature page of a merchant processing 11
agreement: 12
1. The amount of any fee, fine, or penalty, incl uding liquidated damages, 13
that may be assessed or charged by the credit card processor to the 14
business for termination of the agreement before the expiration of the 15
term agreed upon by the processor and business; 16
2. The expiration date of the agreement; 17
3. If applicable, the renewal date of the agreement; and 18
4. The customer service contact information of the credit card processor, 19
including telephone number, mailing address, and email address; 20
(b) Ensure that a merchant processing agreement contains, in ad dition to the 21
business signatory's signature, the initials of the business signatory next to 22
the information required under paragraph (a) of this subsection; and 23
(c) Provide a copy of a merchant processing agreement that contains the 24
information required under, and is initialed and signed in accordance with, 25
this subsection to a business: 26
1. In electronic or paper format; and 27
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2. At the time the business enters into the agreement. 1
(4) (a) Any provision of a merchant processing agreement that violates subsect ion 2
(2) of this section shall be void and unenforceable. 3
(b) If a credit card processor violates subsection (3) of this section, any 4
provision in the merchant processing agreement that assesses or charges an 5
early termination fee, fine, or penalty, including liquidated damages, to the 6
business shall be void and unenforceable. 7
(5) This section shall not apply to a merchant processing agreement that: 8
(a) May be terminated without the credit card processor assessing or charging a 9
fee, fine, or penalty, including liquidated damages; or 10
(b) Is entered into by a business that: 11
1. Generates more than two million five hundred thousand dollars 12
($2,500,000) in credit card or electronic commerce transactions each 13
year; and 14
2. Employs more than thirty (30) employees. 15
(6) (a) The remedies and penalties set forth in this section shall be cumulative. 16
(b) Nothing in this section shall be construed to limit or restrict the powers, 17
duties, remedies, or penalties available to any person under any other 18
statutory or common law. 19
Section 2. This Act appli es to contracts entered on or after the effective date of 20
this Act. 21