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Cash or Credit? The Battle Over How to Define the Credit Card Processing Fee

February 10, 2017
Attorney At Law Magazine - Minnesota Edition
Author: Kristin B. Rowell

On Jan. 10, 2017, the United States Supreme Court held oral argument in the case of Expressions Hair Design, et al. v. Schneiderman, et al., No. 15-1391. You may be surprised to hear that this is not a case about hair products, hair styling or furniture; it is a case about credit card processing fees.

Here’s the background. Ten of our 50 states, including New York, Florida, California and Massachusetts have enacted laws that allow merchants to charge higher prices to consumers who use a credit card to pay for their merchandise instead of cash, but the laws also essentially require the merchant to communicate to consumers that if the consumer pays with cash, the consumer will receive a “discount” rather than allowing the merchant to communicate to the consumer that if the consumer pays with a credit card, he or she will be charged a surcharge or processing fee. For example, New York’s statute, which was the law at issue in Expressions Hair Design, states, “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”

The petitioners in Expressions Hair Design argued that the problem with this law is that it unconstitutionally regulates speech because it prohibits the merchant from telling its consumers that a portion of a product’s listed price contains a credit card fee. As it currently stands, under the New York statute, a merchant would not be allowed to list its price for a cup of coffee as $2 and then say, “[b]ut we charge an extra 5 cents for credit cards.” Instead, the merchant would have to list the price of the cup of coffee as $2.05 and tell the customer who pays with cash, “[a]ctually, for you it is only $2.00 because we give a cash discount.” Read more.