Retailers Want Supreme Court to Rule for Transparency with Credit Card Fees

Retailers Want Supreme Court to Rule for Transparency with Credit Card Fees

January 16, 2017         Written By Bill Hardekopf

The National Retail Federation is asking the United States Supreme Court to rule that retailers can show customers the exact price they will pay if they use a credit card instead of cash.

“Retailers have no interest in surcharging their customers for using credit cards,” NRF Senior Vice President and General Counsel Mallory Duncan said. “That would be the opposite of our goal to bring credit card swipe fees under control. But merchants do want to be able to show customers the cost of using a credit card without running afoul of the law.

“This case isn’t about surcharging,” Duncan said. “It’s about giving retailers freedom of speech when they try to give their customers a break for paying by cash. Some states allow cash discounts but prohibit credit card surcharges. A gas station owner shouldn’t be hauled into court for saying gas is $2.90 a gallon cash and $3 credit rather than saying $3 credit and $2.90 cash.”

In 10 states, merchants are prohibited from charging customers a surcharge for using their credit card. The laws, which retailers say were passed at the urging of the credit card industry, can make things difficult for merchants that offer a cash discount.

In the lawsuit,  Expressions Hair Design v. Schneiderman, plaintiffs argue the law violates merchants’ freedom of speech, which is protected under the First Amendment. They also claim the laws are “unconstitutionally vague” under the 14th Amendment’s Due Process Clause.

Some of the U.S. Supreme Court justices seemed unconvinced by this argument.

“What speech precisely do you think is being restricted?” asked Justice Elena Kagan. “This statute is not written in terms of speech,” she later added. “It’s written in terms of imposing a surcharge.”

“The statute simply says,” Justice Sonia Sotomayor said, quoting from the law, “’No 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. To me, it’s very simple: one price for everything.”

On average, banks charge merchants a 2% transaction fee every time a credit card is used and 21 cents when a debit card is used. These fees total $50 billion a year. Retailers argue these fees increase costs for consumers, as the card industry rules require merchants to build these fees into merchandise costs.

The Court is expected to rule in June of this year.

The information contained within this article was accurate as of January 16, 2017. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Bill Hardekopf

Bill Hardekopf is the CEO of and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
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