Federal Court Okays New York Ban on Credit Card Surcharges

October 5, 2015, Written By Natalie Rutledge

Last week, a Federal appeals court ruled it was constitutional for the state of New York to prohibit merchants from passing along credit card fees to their customers.

The 2nd U.S. Circuit Court of Appeals voted 3-0 to reverse a decision by a lower court judge which allowed retailers to place a surcharge on a transaction made with a credit card. Any merchant found in violation of this law is subject to a fine of up to $500 or an imprisonment up to one year, or both.

A retailer cannot charge a customer extra for making a credit card transaction, but can offer that customer a discount if they pay in cash.

Papers submitted in court showed that ten other U.S. states have similar laws.

When the law was originally passed, retailers argued it went against their freedom of speech to educate consumers about credit card fees. Circuit Judge Debra Ann Livingston wrote in the appeal that this is not a matter of freedom of speech, but rather about regulated pricing practices.

“We are aware of no authority suggesting that the First Amendment prevents states from protecting consumers against irrational psychological annoyances,” said Judge Livingston.

With the increased cost of converting to chip and PIN cards and the rising cost of credit card transactions, retailers are continuing to look for ways to divert consumers away from plastic payments. The emergence of mobile wallets like Android Pay, Samsung Pay, and Apple Pay may help alleviate some of the financial pressure for retailers caused by these credit card interchange fees.

The information contained within this article was accurate as of October 5, 2015. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.

About Natalie Rutledge

Natalie Rutledge majored in Communications at Mississippi State University. She was in sales for a number of businesses and spent nine years working as a communications advisor to various entities. Natalie can be contacted directly at [email protected]
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