Surcharge laws challenged at state level.

We are two years into the U.S. surcharging era. While the media coverage has seemingly quieted, heated debates are still occurring in some states. The eventual outcomes could drive other states to reconsider their stance. When the card networks lifted surcharge bans in 2013, New York, California and Florida were all “no surcharge” states. Then various types of merchants (most of whom are small) initiated litigation based on First Amendment rights, which muddied the waters.

 How many other  “no surcharge” states will go to court in response to merchant lawsuits? Maybe the Supreme Court will step in first. 

How many other “no surcharge” states will go to court in response to merchant lawsuits? Maybe the Supreme Court will step in first. 

Lawsuits

  • New York, case number 1:13-cv-03775; filed June 4, 2013
  • California, case number 2:14-cv-00604; filed March 4, 2014
  • Florida, case number 1:14-cv-00025;
    filed March 5, 2014

The Claims

In general terms, the merchants associated with the lawsuits and their legal representation are centering their cases on communication versus economic injustices. They have argued that the laws allow them to promote discounts for cash payments, but prohibit them from enlightening customers about card acceptance fees, which customers end up paying in the form of higher prices—essentially, a surcharge.

The Rulings

The judges in these cases have mixed opinions. In October 2013, U.S. District Judge Jed S. Rakoff in Manhattan ruled in favor of the merchants, rendering New York unable to enforce the law. In Florida, U.S. District Judge Robert L. Hinkle dismissed a similar lawsuit in September of last year. The merchants there are appealing, while the state’s attorney general supports the original “no surcharge” law and is encouraging the court to uphold the judge’s decision. The pendulum shifted yet again when U.S. District Judge Morrison England in California agreed with the merchants on March 26 this year. The attorney general is asking the court to overturn this ruling.

Given the controversy, some legal experts think the issue will land in the Supreme Court. 

Surcharges and Commercial Cards

In the Commercial Card industry, we know the issue has not disappeared for end-users. A June 2014 article by First Annapolis relayed a lack of surcharging in the United States, which was good news. However, such industry observations do not help when end-users continue to encounter suppliers who apply a surcharge to their Commercial Card payments. I recently heard one end-user in Kansas describe that an in-state supplier surcharges even though Kansas is a “no surcharge” state. If you are in a similar boat, consider contacting your state’s attorney general about the surcharge violations.

Has your organization discussed surcharges and taken any actions? It is beneficial to implement strategies and train cardholders accordingly. Check out the educational resources available from Recharged Education


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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