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Tuesday, February 13, 2024

NY mandates more 'transparency' in surcharging

Merchants in New York have a new set of marching orders when it comes to surcharging payments made by credit card. Under a law that took effect on Feb. 11, 2024, businesses must disclose the total cost of a product, inclusive of any surcharge amount, before customers ever reach the checkout.

The business may either display the total price of an item (inclusive of surcharge) on the item or the shelf, or they can list separate prices—one for customers paying by credit card and one for cash-paying patrons—on individual products or the shelves carrying those products. 
 The law also stipulates that the added cost for a credit card payments cannot exceed what the merchant is charged by its payment processor.

Merchants running afoul of the new law are liable for civil penalties of $500 per violation, imposed by the state consumer affairs commission or any local government agency fielding a consumer complaint about a surcharging merchant.

"New Yorkers using credit cards have a right to know the total cost of the purchase, inclusive of any surcharge before they reach the register," said New York Secretary of State Robert Rodrigues. "This new law signed by Governor [Cathy] Hochul will offer clarity and provide transparency to both consumers and business owners about surcharges when using a credit card.

Chipping away at state laws

Back in 2017, New York was one of just 10 states with laws that specifically addressed credit card surcharging, typically outlawing the practice but allowing discounts for cash. Many of those state laws, however, have since been declared unconstitutional or simply repealed.

The New York law was declared unconstitutional by the U.S. Supreme Court, which ruled in Expressions Hair Design v Schneiderman that, as written, a law directing how merchants inform customers that paying by card costs more violated the First Amendment's free speech guarantee. The case was sent back to a lower court for further consideration, which ruled that prices displayed need to be the credit card prices, and merchants can discount those prices for cash customers if they choose.

The new law in New York seems to fine tune that ruling without running afoul of merchant free speech rights. "This new law provides merchants additional flexibility in determining whether to pass along the cost of accepting credit cards, but continues the trend of requiring merchants to conduct a state-by-state analysis to determine whether there are any requirements as to how the surcharge must be presented to the customer," wrote the law firm Bass Berry & Sims in an analysis published in December 2023.

In addition to New York, Connecticut, Massachusetts and Maine now have laws on the books that address credit card surcharging. Surcharging laws in both Kansas and Texas have been declared unconstitutional by federal courts, and legislation pending in both states would repeal those laws, Bass Berry & Sims noted in its analysis. end of article

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