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Education

pend on where their customers are acted anti-surcharging laws, those merchants could face stiff penalties, includ-
purchasing their products. For mer- ing potential prison time, if they try to surcharge their customers in violation
chants whose customers purchase of the anti-surcharging laws – as long as those laws remain in effect. But even
their products in one or more states in the states with laws that prohibit surcharging, imposing a discount program
that do not have laws banning sur- is defensible, as shown through the Expressions Hair Design case.
charging, surcharging is essentially
wide open as long as the merchants Unintended consequences
comply with the card brand rules. Payment companies and merchants must navigate a minefield of potential
Merchants in those states – particu- legal and practical pitfalls when considering whether to impose surcharges
larly marijuana dispensaries and oth- and maximize the potential opportunities available to them. To successfully
er high-risk merchants, nutraceutical navigate that minefield, businesses that desire to offer surcharging programs
companies, and certain loss leader should tailor their programs to comply with the applicable rules and regulations,
outfits – could be surcharging their and continue to monitor developments. Doing so is a logistical challenge for
customers across the board for credit entities operating in multiple states, but with proper counsel, it's relatively easy.
card purchases. But doing so brings
inherent risks. Essentially, considerations must be focused on other potential non-legal
unintended consequences that could undermine the economic opportunities
To mitigate the risks, payment com- of implementing surcharging programs.
panies should work with merchants
to help them consider all the ways Josh Herndon is an attorney at the Global Legal Law Firm, whose attorneys are experts in the
surcharging could negatively impact payments industry. The firm's passion for this field derives from working with a number of pay-
the customer experience, as well as ment companies run by exemplary people who provide opportunities for their employees and
the damaging results unfavorable workers to reach higher levels of fulfillment in their careers and personal lives. Herndon works in
customer experiences could have on the compliance field helping electronic payment companies avoid violating rules, as well as avoid
their businesses. being fined, arrested or sued from internal or external threats. He is also involved in litigation in
Factors affecting acceptance the payments space, including defending and pursuing electronic payment companies. He can be
reached at jherndon@attorneygl.com.
For instance, merchants need to con-
sider their customer base, and their
reaction to a surcharge. A coffee shop
surcharging $0.30 on a $3 transaction
may lose customers who are looking
to keep their coffee budget under $900
per year. In addition to assessing the
possibility of losing upset customers,
merchants also need to consider that
even one upset customer can create a
negative reputation for them on Yelp
and other social media. However,
merchants who are not concerned
about such practical considerations
can lower their costs substantially by
surcharging their customers.
An area where surcharging has re-
ceived wide acceptance is in sectors
where accepting card payments is
difficult. Businesses in the cannabis
space are one example of this. Dis-
pensaries that accept card payments
are happy to impose a surcharge be-
cause a dispensary that accepts card
payments is likely only one of a few
that have procured the appropriate
vendors.

As for the potential pitfalls for mer-
chants whose customers purchase
their products in states that have en-

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