Friday, February 26, 2021
Razi, a Harvard Law graduate, thanked U.S. District Judge John W. Broomes for his favorable ruling affirming the constitutionality of the CardX technology solution. "Surcharging is becoming even more prominent as payments continue to move online," Razi said in a statement. "And, with upcoming interchange increases in April, this is timely relief for the many companies that will be looking to reduce their costs of payment acceptance."
CardX COO Michael Tomko, also a Harvard Law graduate, was also pleased with the decision and noted the court ruling pertained specifically to CardX; he urged service providers to review state guidelines. The court held that prohibiting credit card surcharging was unconstitutional "as applied" to CardX and CardX's software, leaving open the possibility that the court could challenge the constitutionality of other surcharge solutions, he stated.
"There is still the possibility that the Kansas statute could be enforced against other merchants or providers if the fact pattern were different," he said. "Compliance continues to be the defining question in the surcharging space."
Tomko further noted that the precedent-setting ruling has freed CardX to partner with Kansas-based ISOs and MSPs, a number of whom have inquired about the company's services. Company representatives are reaching out to existing partners to let them know they can begin deploying the CardX solution, he added.
"Our core value proposition as a Regtech company in the payments space is solving for this regulatory overhead and making surcharging just as easy from the ISO's or merchant's perspective as traditional processing," Tomko added.
Near-term plans to increase Visa and Mastercard interchange rates in a number of merchant categories, combined with continuing migration to ecommerce and more expensive card-not-present payments, have made surcharging a timely relief for many companies, Tomko stated.
The Kansas ruling acknowledged that CardX has deployed its solution nationally in compliance with various state laws. "Since 2003, Plaintiff has contracted with more than 5,000 merchants, ranging from small businesses to public companies, in the 46 states (and in the District of Columbia) where credit surcharges are currently permitted (Id. payment processing software allows merchants to display and process price differentials in compliance with all applicable credit card company requirements," Justice Broomes wrote. "The standard pricing model of Plaintiff's software displays the price of the good or service, plus the cost associated with credit card use both as a percentage of the price and in dollars and cents. This model is used for both online displays and payment terminal signage and screen displays. The model ensures that the surcharge is always equal to the processing cost, and that no surcharges are applied to debit card purchases."
As they reflect on recent progress, CardX executives stated that they are setting their sights on Colorado, Connecticut, and Massachusetts, the three remaining states with "no surcharge" laws on the books.
"We're actively reviewing our options for the remaining states, and we intend to be a 50-state provider," Razi said. "Many of our largest clients have expressed interest in a national pricing strategy, and we will continue to push the regulatory movement forward until CardX is available in all 50 states."
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