In 2013 the card brands Visa, Mastercard, Discover, and American Express made it legal for merchants to implement a surcharge on credit card transactions. It was then up to the individual States to define the rules & regulations on how a merchant can apply a surcharge to credit card transactions.
Merchants in the remaining six states are fighting the restrictions and working to get their state to make surcharging legal.
Expressions Hair Design vs. Schneiderman
Recently, a group of merchants went to the Supreme Court to fight for the right to surcharge in the state of New York. The case of Expressions Hair Design v. Schneiderman, Attorney General of New York examined the practice of surcharging and is relevant to any merchant who accepts credit cards in the United States.
The case centered around a New York barber shop that wanted to charge customers 3% extra for paying with a credit card. The barber shop, Expressions Hair Design, argued that this additional cost helped them offset the fees charged by their credit card processor. The problem? New York State is one of the states across the country that restricts credit card surcharges.
The merchants also argued that the laws around pricing and communication are “unconstitutionally vague,” which seems to hold some water since the District Court and the Court of Appeals could not agree on a verdict. The New York state judicial branch will continue to review the case.
As it stands now, 44 states allow surcharging, thanks to the Expressions Hair Design vs. Schneiderman case. Most recently added to the list of surcharging approved states is New York and Texas.
Both states must supply their customers with a specific disclosure form alerting the customer to the surcharge before the transaction has been processed. The courts have not made their final decision yet, but they have allowed these two states to surcharge until the final ruling is given.
The implications on the future of surcharging
If the courts rule in favor of the merchants, then the ban on surcharging in New York will be dropped, and all 50 states will be allowed to surcharge.
Business owners should focus on the rules and regulations of surcharging and make sure that the surcharging solution maintains compliance in any state the business operates.
Regardless of where your company is based, if you are curious about implementing a surcharging program and improving the overall efficiency of your Credit Card Processing, contact us.
Our highly trained staff will assist you in navigating this new era of merchant care to ensure your company stays compliant with the laws of your state, allowing you to focus on doing what you do best—running your business.