US: NY Judge rules swipe-fee surcharge ban is unconstitutional

Merchants in New York scored a major victory in the swipe-fees wars Tuesday as a US District Judge ruled the state’s law that bans the practice of transferring swipe-fees onto consumers is unconstitutional.

US District Judge Jed Rakoff ordered New York not to enforce the law following a lawsuit filed by several independent businesses, including a hair salon and ice cream parlor.

The lawsuit, filed last June, challenged the legislation as a violation of free speech rights; the basis of the businesses’ argument was that stores would be penalized for transferring swipe fees onto their consumers despite the legality of offering discounts to consumers paying with cash or debit cards.

Judge Rakoff’s ruling described the legislation as a “virtually incomprehensible distinction between what a vendor can and cannot tell its customers.”

Reports say the ruling centered upon the term “surcharge.”

Swipe-fees are a hot debate topic as credit card giants Visa and MasterCard are in a major class action lawsuit with a multibillion-dollar settlement awaiting its fate.

Full Content: Businessweek

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