Credit Card Surcharges

Posted by msmessenger on Sep 1, 2016 12:00:00 AM

Storage operators have long experienced the anguish of the transaction fees charged by credit card companies that come with accepting credit payments. As these transaction fees (also called “swipe fees”) can be up to three percent of the charge to the credit card, merchants have looked for ways to offset these fees. One of those solutions was to charge the customer fees for using a credit card to make a payment.

Merchants filed an antitrust class action lawsuit against Visa and MasterCard on claims related to the transaction fees charged by those credit card companies. In 2013, the parties entered into a settlement agreement which provided, in part, that Visa and MasterCard had to allow merchants to charge fees to customers who use a credit card to make a payment. The settlement agreement was finalized by the court in December 2013, however the settlement was appealed; and, in late June 2016, the appeal was granted and the settlement was rejected. American Express is currently involved in a similar class action lawsuit and had reached a settlement agreement that would have mirrored the Visa/MasterCard settlement agreement, but the court in that case also rejected the settlement agreement due to attorney misconduct.

As part of the settlement, which is now subject to reversal, merchants decided to try and offset the credit card swipe fees charged to them by turning around and charging a fee to the buyer for the use of a credit card to make payments on goods and services (often called “credit card surcharge” or “checkout fee”). However, before moving forward with charging a fee for credit card usage, merchants must be aware of applicable state laws as several states, including Colorado, Connecticut, Kansas, Massachusetts, New York, Oklahoma, and Texas, strictly prohibit assessing surcharges on the use of credit cards, and more and more states are proposing similar legislation.

In November 2015, the Eleventh Circuit Court of Appeals reversed a district court decision and ruled that Florida’s law banning credit card surcharges violated the First Amendment as it was an unlawful restriction on free speech. The Court of Appeals also held that a business could be allowed to offer a discount to customers who use cash instead of credit cards.

While the vast majority of states permit credit card surcharges, it is important to note that merchants who wish to charge credit card surcharges are also subject to numerous rules imposed by the credit card companies themselves regarding these surcharges. For example, if a merchant accepts other credit cards in addition to Visa and MasterCard, those merchants cannot assess a surcharge to customers using Visa and MasterCard unless a similar surcharge is assessed for the use of other credit cards as well.

As such, if you wish to start charging surcharge fees on credit card purchases, we would recommend consulting with an attorney regarding your state law on credit card surcharges, then contact the credit card company to let them know of your intent to do so and speak with them regarding their rules for assessing surcharges to ensure that you are on the same page so that you do not end up violating your agreement with them.