Second Circuit Holds Credit Card Surcharge Doesn’t Violate U.S. Constitution
On Sept. 29, the Second Circuit court of appeals upheld New York’s ban on credit card surcharges, finding the restriction doesn’t violate the U.S. Constitution.
The underlying case involved a group of New York retailers that challenged the state’s credit card surcharge ban. In 2013, a district court ruled in favor of the retailers, finding that the New York law impermissibly regulated speech in violation of the First Amendment because it drew a line between prohibited “surcharges” and permissible “discounts,” based on words and labels, not economic realities. The district court further found that the law was void for vagueness and, therefore, a violation of the Due Process clause as well.
The Second Circuit disagreed and vacated the district court’s ruling. The Second Circuit found that New York’s law differed significantly from other laws aimed at regulating process and, therefore, did not violate the First Amendment. The Second Circuit also found that because the New York law had a core meaning that could be reasonably understood, it was not impermissibly vague and also did not violate the Due Process clause.
Industry participants should take note that the decision, by approving the use of surcharge bans under the federal law, may open the door to similar surcharge bans on payment card transactions in other states.
