Appeals Court Upholds Texas ‘No Surcharge’ Law
The Credit Union National Association (CUNA) is applauding a decision by the U.S. Court of Appeals for the Fifth Circuit, upholding a Texas state law that prohibits merchants from imposing a surcharge on purchases made with a credit card. A group of merchants had challenged the law, arguing that it unconstitutionally limits free speech. The merchants claim that, while the law focuses on how they communicate their prices to consumers, the Office of Consumer Credit Commissioner, in its reply briefs, focused on speech not regulated by the law, including arguing that merchants are still free under the law to directly encourage consumers to pay with cash.
CUNA filed an amicus brief in the case in August 2015, arguing that allowing merchants to add additional surcharges to credit card transactions would allow them to receive the substantial value of participating in the credit card system, while passing costs along to consumers and financial institutions.
As previously reported, the case is an example of the growing trend of merchants challenging state surcharge laws, but the courts have disagreed on the issue. In September of last year, the Second Circuit Court in New York held that the state’s credit card surcharge ban doesn’t violate the U.S. Constitution. Meanwhile, a federal court in California ruled the state’s ban on surcharges unconstitutional and a ban on surcharges in Florida also was struck down earlier this year.
