Academic journal article ABA Banking Journal

The Slippery Business of Surcharging

Academic journal article ABA Banking Journal

The Slippery Business of Surcharging

Article excerpt

IMAGINE TAKING A trip to New York this winter and walking up to the Rockefeller Center skating rink to rent some skates and spend a few minutes on that famous ice. Now contemplate being charged an extra fee for using your credit card instead of cash. Currently, a state law prevents Empire State merchants from imposing this kind of fee on consumers, while allowing retailers to offer a discount for those who use cash. The nation's highest court will soon hear a challenge A brought by merchants against this law.

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The practice of charging a credit card fee on top of an advertised ("sticker") price is known as "surcharging," and ten states and Puerto Rico have anti-surcharging statutes in place. When a retailer provides a discount off the sticker price to consumers who tender cash, they are engaging in "cash discounting." While the final price may end up the same under both practices, anti-surcharging statutes have not been interpreted to prohibit cash discounting.

In Expressions Hair Design v. Schneiderman, the Supreme Court is considering a challenge from retailers who claim that anti-surcharging laws violate their constitutional rights to free speech by restraining one method of conveying prices. Federal District Court Judge Jed Rakoff declared the law unconstitutional, ruling it was an "incomprehensible" restriction of commercial speech. Using similar reasoning, the Eleventh Circuit struck down Florida's no-surcharge law in Dana's R.R. Supply v. Florida. …

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