NYC: Are Credit Card Surcharges Legal?

Are Credit Card Surcharges Legal in NYC?

Are Credit Card Surcharges in NYC Legal, or can you call out a business when you're surprised by a stealth surcharge suddenly applied when you attempt to pay your bill with a credit card? How about if the surcharge only applies to AMEX cards?

TravelSort reader Chris writes “I was at a doctor's office in Manhattan (a specialist, not my primary physician) and pulled out my AMEX to pay, but was told there was a 3% surcharge. I then asked if there was a similar fee to pay with Visa or MasterCard, but was told there wasn't. Is it legal to charge a 3% surcharge just for AMEX customers? Are any credit card surcharges legal in NYC? I thought there was a ban on credit card surcharges, did something change?”

Chris is correct that New York’s General Business Law § 518 prohibits merchants from charging a surcharge to customers who opt to pay with a credit card instead of cash, with a violation considered a misdemeanor punishable by a fine of up to $500 or 1 year in prison or both.

But back in 2013, several retailers sued New York State's Attorney General in the case Expressions Hair Design v. Schneiderman, claiming that the law violates the First Amendment by allowing higher prices for credit card users while restricting the manner in which retailers may describe those prices. The retailers wanted to be able to post just one price, with a notice stating that either a fixed amount or percentage would be applied to that price when paying by credit card.

The District Court agreed with the merchant plaintiffs, but New York State appealed the case to the Second U.S. Circuit of Appeals, which agreed with NYS that the law regulated business conduct, not speech. The Supreme Court of the U.S. (SCOTUS) granted certiorai in 2017 and heard the case, determining that § 518 regulates speech (not prices), and remanded it back to the Second Circuit for a decision on whether the law impermissibly regulated speech.

The Second Circuit asked the NYS Court of Appeals to answer the question: “Does a merchant comply with New York’s General Business Law § 518 so long as the merchant posts the total-dollars-and-cents price charged to credit card users?” A 4-3 divided court decision agreed.

So what's the practical result? New York businesses MAY impose a credit card surcharge, but they cannot require you to do the math: the actual price in dollars and cents when using a credit card must be posted.

Example 1: A Merchant Lists a Cash Price and Credit Card Price for All Items

This scenario, under current New York State law, is legal. You are aware of the exact amount you have to pay with a credit card, from the posted price.

Example 2: A Merchant Lists a Single Price, and Notes Only That a 3% Credit Card Surcharge Applies

This scenario is illegal under current NYS law. This is what the plaintiffs wanted to do, and under the New York State Court of Appeals, this is not allowed as the exact price in dollars and cents, when paying with credit card, is not posted anywhere.

Example 3: A Merchant Lists the Credit Card Price, and Offers a Discount for Paying in Cash

This is allowed, even though the merchant has not posted the exact cash price. A cash discount is allowed, as long as the exact price when paying by credit card is posted.

Example 4: A Merchant Charges a 3% Surcharge for Paying with AMEX Cards But Not for Paying with Visa or MasterCard

This isn't governed by New York State law, but it's not permitted in the AMEX merchant contract, which states that merchants may not charge any more to accept AMEX than to accept other credit cards, such as Visa or MasterCard. If the merchant only accepts AMEX cards (and not other credit cards) than the surcharge is allowable, but in that case, the merchant still has to comply with New York State law in providing the actual amount payable when using an AMEX card (in dollars and cents) vs. paying with cash.

Have you been charged a credit card surcharge in New York or elsewhere, and if so, was it a legal charge or contrary to prevailing law?

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