Regulation

Credit Card Surcharges OK'ed In New York

New York has banned the ban. In the wake of court filings this week that effectively ended a challenge to surcharges on credit card transactions in New York, merchants in the Empire State can indeed embrace those fees, contingent upon stating those costs to consumers up front.

The merchant plaintiffs and the state of New York filed motions on Jan. 8 to dismiss a challenge to such charges, seemingly capping a battle stretching back years. Now, merchants must disclose those surcharges as part of “total” prices in dollars and cents. The requests from those parties to dismiss the case came after an appellate court in the state ruled that merchants have the right to levy the charges, and the tally of states with such bans in place has now dropped to six.

The case traces its genesis to 2013, when several businesses joined a group and, headed by hair salon Expressions Hair Design in New York, filed a suit in federal court against the state ban on surcharges. The merchants were allowed to offer discounts for cash payments on goods and services, but could not let customers know how much they would pay for credit card transactions, and the suit challenged the ban on First Amendment grounds.

The federal court sided with the merchants, but then, through a series of appeals, the case wound up before the Supreme Court at the beginning of 2017. The Supreme Court sent the case back to the Second Circuit, deciding that the case was a regulation of commercial speech. The appeals court bench ruled in October of last year that, by listing the total dollars and cents price, merchants could call the difference between card and cash prices “anything they wish.” What’s in a name, then? The court ruled that such terms could range from surcharge to “extra cost.”

Supplemental briefs were required to be filed last month, but the motion by the plaintiffs and the state this week means that the case may be dismissed, pending approval of the court itself. The striking down of the ban in New York comes on the heels of similar challenges that eliminated bans on passing along credit card fees in Florida, California and Texas.

In a statement emailed to PYMNTS, CEO Jonathan Razi of CardX, a payments technology company that automates compliance with rules for credit card surcharging, said that “with today’s resolution, we expect the New York law will survive, but in a far narrower form — and ‘no surcharge’ will simply mean ‘no surprise.’ Now, New York merchants are allowed to pass on their credit card fees, so long as they make the required consumer disclosure.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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