August 7, 2017
Authored by: BCLP, Vanessa Fulton, Stanton Koppel and Seyi Iwarere
State laws that prohibit retailers from charging customers a surcharge for using a credit card are being challenged on First Amendment grounds.
For more than four decades, California’s Song-Beverly Credit Card Act of 1971 prohibited retailers from charging credit card customers such a surcharge. In Italian Colors Restaurant, et al. v. Harris, 99 F.Supp.3d 1199 (E.D. Cal. 2015), a federal judge ruled that the law unconstitutionally limits retailers’ freedom of speech. The California attorney general appealed, and the case is set for oral argument before the Ninth Circuit Court of Appeals on August 17.
The outcome may be influenced by the U.S. Supreme Court’s decision in March of this year in Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017), that a similar New York ban on credit card surcharges implicates the First Amendment. That case has been remanded to the Second Circuit to determine whether the ban is unconstitutional.
In states where the surcharge prohibitions have been invalidated by court action, the statute is likely unenforceable, at least temporarily while appeals are being pursued. Ecommerce retailers seeking to impose surcharges also should take care to determine which state’s laws apply to a transaction. It is not safe to assume that the retailer’s location would determine the applicable law. More likely than not, the laws of the state where the customer resides would be applied to the transaction.
Eleven states have passed similar laws banning credit card surcharges. A summary is available here.
Four of those laws