Recent legal trends raised the likelihood that merchants will pass on their credit card transaction fees – that is, the fee that credit card providers charge merchants to process a credit card transaction – to consumers. Previously, many states banned so-called “credit card surcharges” by enacting laws which prohibited sellers from charging consumers a separate fee for using a credit card. Nevertheless, those same laws allowed sellers to provide a discount to consumers paying with cash.
The tide turned for merchants following the United States Supreme Court’s ruling in Expressions Hair Design v. Schneiderman, 137 S.Ct. 1144 (2017), wherein the High Court concluded that such laws regulate speech rather than conduct, setting the stage for a battle of constitutional proportions in the courts below. Following this example, the District Court of the Western District of Texas prohibited enforcement of Texas’ surcharge prohibition against the plaintiffs in Rowell v. Pettijohn, 1:14-cv-00190 (W.D. Tex. 2018). The District Court found that Texas’ surcharge prohibition was an unconstitutional infringement on the merchants’ free-speech. That is, a merchant can communicate to its customers both a discount for paying cash and an additional fee for paying with a credit card. Although the Texas legislature has not yet amended or rescinded the statute, it is highly unlikely that the Texas Attorneys’ General Office will enforce the law in the wake of Rowell.
Currently, only six states ban credit card surcharges: Colorado, Connecticut, Kansas, Maine, Massachusetts, and Oklahoma. In light of Expressions, it is anticipated that those states’ laws will be challenged in court or rescinded by the legislature. Merchants interested in implementing a credit card surcharge program need only review the terms and conditions supplied by their credit card provider to determine the registration, notice, disclosure, and other requirements necessary to pass on credit card transaction fees to the consumer.
This post was written by John Paul Regan.