PaymentsJournal
No Result
View All Result
SIGN UP
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
PaymentsJournal
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
No Result
View All Result
PaymentsJournal
No Result
View All Result

Call it What it is: New York Judge Blocks “Surcharging” Ban

By Michael Misasi
October 4, 2013
in Mercator Insights
0
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

Judge Jed Rakoff, of the District Court ofNew York’s Southern District, has issued a preliminary injunctionto block a 1984 state law that prohibits merchants from imposingsurcharges on credit card payments. At face value the ruling isquite surprising considering that no-surcharge laws remain in forcenine states (CA, CO, CT, FL, KS, ME, MA, OK, and TX), and there issupport in several other states for implementing such laws. InNovember 2012, a judge’s preliminary approval of a proposedsettlement between merchants and the card networks gave merchantsthe right to surcharge as of January 27, 2013.

Anti-surcharging laws are essentially consumer protection laws.They are intended to prevent consumers from paying more than theyexpect at the point of sale. Judge Rakoff expects that merchantsurcharging will force the card networks to lower interchangerates, which will benefit small businesses.

From American Banker:

“Absent surcharges, consumers may be unaware that when they use acredit card, the relevant credit-card company charges the retailera fee,” Rakoff wrote. Permitting surcharges, he argues, “Will placedownward pressure on swipe fees, which credit-card companies willbe forced to reduce in order to prevent more and more consumersfrom switching to cash.”

Interestingly enough, the opinion does not mention any anticipatedtrickle-down benefits to consumers resulting from reducedinterchange rates. Rather, Judge Rakoff references research thatsuggests that no-surcharge rules “force cash users (who are said tobe disproportionately poor and minority persons) to subsidize theretail purchases of credit card users.”

What makes this case different from other surcharging debates isthat Rakoff’s ruling is based primarily on First Amendment issuespertaining to the current New York State law, not the economicimpact of surcharging. The current law does not restrict merchants’ability to charge different prices for cash and credittransactions. It merely says that merchants must characterize thediscrepancy as a cash discount and not a credit surcharge. Theplaintiffs are objecting to such a restriction of expression.

The law, according to Rakoff’s opinion, “draws the line betweenprohibited ‘surcharges’ and permissible ‘discounts’ based on wordsand labels rather than economic realities.” The Court has perhapsappropriately issued an injunction based on its interpretation ofthe law. Unfortunately for consumers, the potential negativeeconomic impact of surcharging was not debated fully in this case.In light of this ruling, it would not be surprising to see newlegislation proposed that is designed to restrict surcharging onthe basis of harm to consumers.

Click here to read a past PaymentsJournalPerspective on the proposed Merchant Antitrust Settlement. Click here to read the court’s opinion.

Follow Michael Misasi on Twitter @mikemisasi.
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn
Tags: Banking ChannelsCashCompliance and RegulationCreditDebitEMVFraud Risk and AnalyticsMobile PaymentsPrepaidSelf Service and ConvenienceSocial Media

    Get the Latest News and Insights Delivered Daily

    Subscribe to the PaymentsJournal Newsletter for exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    Making Real-Time Payments a Reality

    Fulfilling the Promise: Making Real-Time Payments a Reality

    July 10, 2025
    mortgage

    The Rich Benefits of In-House Payment Systems

    July 9, 2025
    digital cards

    Beyond Plastic: Why Digital Cards Are the Future

    July 8, 2025
    What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market

    What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market

    July 7, 2025
    Rewire Acquires Imagen, Looking at Prepaid Cards for Migrant Workers

    Smells Like Team Spirit: What Makes Cobranded Credit Cards Work

    July 3, 2025
    uk banking outages

    New Continuous Strategies for Battling Account Takeovers

    July 2, 2025
    Fraud Monitoring

    What to Expect When Nacha’s Fraud Monitoring Rules Take Effect

    July 1, 2025
    payments

    Don’t Just React to What’s Next in Payments—Anticipate It

    June 30, 2025

    Linkedin-in X-twitter
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter

    ©2024 PaymentsJournal.com |  Terms of Use | Privacy Policy

    • Commercial Payments
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    No Result
    View All Result