Page 14 - GS170402

News

Supreme Court stiff penalties and even prison time for violating anti-

surcharge laws, which vary by state, legal analysts have
likens surcharging noted.

Interchange plus and minus
to free speech Chief Justice Roberts noted the plaintiffs pay "tens of

thousands of dollars every year to credit card companies"
and those fees add up. "Rather than increase prices across
ive New York retailers who took their cred- the board to absorb those costs, the merchants want to pass
it card surcharge battle to the U.S. Supreme the fees along only to their customers who choose to use
Court have been sent back to New York's lower credit cards," he wrote. "They also want to make clear that
F courts. Plaintiffs in Expressions Hair Design v. they are not the bad guys ‒ that the credit card companies,
Schneiderman 15-1391 won the right to surcharge in 2013, not the merchants, are responsible for the higher prices.
lost on appeal in 2015, and escalated their grievances to The merchants believe that surcharges for credit are more
the Supreme Court on the basis that anti-surcharge laws effective than discounts for cash in accomplishing these
violate their First Amendment right to free speech and goals."
due process under the U.S. Constitution.
The Court's opinion further noted that the petitioning
The Supreme Court's opinion, issued March 29, 2017, merchants are proposing a pricing scheme that posts
validated the plaintiffs' assertion that regulating retail a cash price and an additional credit card surcharge,
prices is tantamount to regulating speech. The high court expressed either as a percentage surcharge or as a
had only agreed to review the constitutionality of existing "dollars and cents" additional amount. "Under this pricing
anti-surcharge laws; its opinion will theoretically guide approach, petitioner Expressions Hair Design might, for
New York and nine other states that currently ban the example, post a sign outside its salon reading 'Haircuts $10
practice. (we add a 3% surcharge if you pay by credit card),'" Chief
Justice Roberts wrote. "Or, petitioner Brooklyn Farmacy &
"The question presented is whether [the New York anti- Soda Fountain might list one of the sundaes on its menu as
surcharge law] §518 regulates merchants' speech and ‒ if costing '$10 (with a $0.30 surcharge for credit card users).'"
so ‒ whether the statute violates the First Amendment," Awaiting further guidance
wrote Chief Justice Roberts. "We conclude that §518 does
regulate speech and remand for the Court of Appeals to Despite the Supreme Court's inconclusive ruling and yet-
determine in the first instance whether that regulation is to-be-determined actions by state courts, merchants and
unconstitutional." payments industry stakeholders remain hopeful that all
50 U.S. states will legalize credit card surcharging. "While
A brief history they are throwing the decision back down to New York's
In their review of the case, Supreme Court Justices 2nd U.S. Circuit Court of Appeals, this opinion makes a
considered interchange pricing and previous legal persuasive case for all other states and circuits," said David
opinions that have shaped payments history and business Leppek, President of Transaction Services LLC. "While
models. They noted card issuers initially forbid merchants the Solicitor General may not currently have a clear
to charge higher prices to customers who paid by credit political ax to grind, the topic of merchant surcharging
card. The 1974 Truth in Lending Act (TILA) legalized could be viewed as an anti-regulation move to help small
cash discounts; the revised 1976 TILA banned credit card businesses, something the current administration has
surcharging. generally supported."

Surcharging was legitimized in January 2013 following a Adam Atlas, Attorney at Law, said, "ISOs see surcharging
retail class action settlement against Visa and Mastercard. as a new land-grab. Some, throwing caution to the wind,
The card brands issued guidelines requiring participating have opted for an all-out sales effort offering merchants the
retailers to post signage and disclaimers in precise right to shift card fees to cardholders. Others, exercising
language and implement standardized pricing models. more caution, have opted to limit themselves to only those
Individual U.S. states subjected these national guidelines states that do not have an outright ban on the practice."
to further scrutiny and interpretation.
Atlas suggested the Supreme Court opinion may embolden
Ten states went on to ban credit card surcharging ISOs who want to be first-to-market with cardholder-
altogether. These bans led to court actions in Florida, payment of card fees. He urged ISOs to think twice about
New York and Texas, which will be subject to review rolling out such programs in states where surcharging is
following the Supreme Court's decision. While these banned. "Issuing banks are heavily invested in merchants
bans remain in place, noncompliant retailers in New paying processing fees, partly to make sending easier and
York, California, Colorado, Connecticut, Florida, Kansas, to facilitate the accumulation of debt by cardholders," he
Maine, Massachusetts, Oklahoma and Texas could face added.

14