COURT OF APPEALS RULES ON CREDIT CARD "SURCHARGES"

EXPRESSIONS HAIR DESIGN, ET AL., Respondents, v. ERIC T. SCHNEIDERMAN, & ET AL., Appellants.,  2018 NY Slip Op 07037 ,No. 100. Court of Appeals of New York. Decided October 23, 2018:

"General Business Law (GBL) section 518 states: "No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means." Few statutes have provoked such diverse interpretations. Our task is to answer a certified question from the United States Court of Appeals for the Second Circuit concerning the meaning of the statute: "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?" The parties agree that GBL § 518 permits differential pricing, in which a merchant offers discounts to customers who pay by cash, so that customers pay a higher price, for the same item, if they use a credit card, than they would if they paid cash. What the statute prohibits is a more difficult inquiry. For the reasons explained below, we answer the Second Circuit's question in the affirmative.

……..

Plaintiffs are five merchants who allege that they wish to engage in differential pricing and to inform customers of their practice by stating the cash price in dollars and cents and the credit card price as a percentage or dollars-and-cents amount, reflecting only the additional charge for credit card purchases and not the total dollars-and-cents price for such purchases. The point is best illustrated by examples. Plaintiffs wish to tell their customers, for example, that "a haircut costs $10.00, and if you pay with a credit card you will pay 3% extra" or "a haircut costs $10.00, and if you pay with a credit card you will pay an additional 30 cents."^[1] This practice, "listing one price and a separate surcharge amount," has been described as "a single-sticker regime" (Expressions Hair Design v Schneiderman, ___ US ___, ___, 137 S Ct 1144, 1151 [2017]) or a "single-sticker-price scheme" (Expressions Hair Design v Schneiderman, 877 F3d 99, 101 [2d Cir 2017]), and we refer to it similarly. The merchants have challenged GBL § 518 as a violation of their First Amendment rights, to the extent that it allows them to charge credit card users higher prices but prohibits them from describing the price difference as they wish.^[2]

………

[S}o long as the total dollars-and-cents price charged for credit card purchases is posted, nothing in GBL § 518 prohibits merchants from explaining the difference in price as a "surcharge" attributable to credit card transaction fees they must bear^[5] . Of course, once price is communicated in the manner required by GBL § 518, the merchant does not "impose a surcharge" within the meaning of the statute. However, imposing a surcharge (as defined by the statute) and using the word "surcharge" are two different things. There is nothing in the legislative history of GBL § 518 or of the federal statute on which it was based to suggest that a merchant could not use the word "surcharge" — or words such as "additional fee" or "extra cost" — to communicate to customers that the credit card price is higher than the cash price. By disclosing the total dollars-and-cents price charged to credit card users, a merchant complies with the statute. The process by which the merchant characterizes the higher amount is irrelevant to the statutory requirement. In short, merchants are free to call the price differential anything they wish without fear of prosecution under the statute.

VI.

For the above reasons, we conclude that a merchant complies with GBL § 518 if and only if the merchant posts the total dollars-and-cents price charged to credit card users. In that circumstance, consumers see the highest possible price they must pay for credit card use and the legislative concerns about luring or misleading customers by use of a low price available only for cash purchases are alleviated. To be clear, plaintiffs' proposed single-sticker pricing scheme — which does not express the total dollars-and-cents credit card price and instead requires consumers to engage in an arithmetical calculation, in order to figure it out — is prohibited by the statute."

CREDIT CARD SURCHARGES - PART 4

With respect to attorneys and credit fees, the New York State Bar Association Committee on Professional Ethics, Opinion 1050 (3/25/15) stated:

"A lawyer may charge a client, as an administrative convenience, a nominally greater amount than the processing fees imposed on the lawyer’s account by a credit card company in connection with the client’s payment by credit card of the lawyer’s advance payment retainer, as long as (i) the client receives disclosure of the up-charge and consents to it before the lawyer imposes it, (ii) the amount of the up-charge is nominal, and (iii) total amount of the advance payment retainer and the processing fees (including the up-charge) are reasonable under the circumstances.        

Rules: 1.5(a) & (b)"

As a note, the full opinion makes no mention of General Business Law 518. See http://www.nysba.org/CustomTemplates/Content.aspx?id=55646

CREDIT CARD SURCHARGES - PART 3

After the enactment of GBL 518, five New York merchants brought an action seeking the ability to tell their consumers that there is a surcharge for using credit.  One petitioner, Expressions Hair Design, had a sign that notified its consumers that it would charge 3% more for haircuts paid with a credit cards until it learned about the New York law. Expressions Hair Design now advertises two prices, a lower one for cash and a higher one for credit, and carefully avoids describing the price difference as a surcharge or an extra cost as a result of paying with a credit card. The other petitioners, Brooklyn Farmacy & Soda Fountain, Brite Buy Wines & Spirits, Five Points Academy, and Patio.com want to set one single price for their goods and services, impose an extra charge for credit card use, and to call the difference a credit “surcharge.”

In the Southern District Court of New York, the State argued that the statute is “an anti-fraud statute” that only bars additional hidden fees and does not prohibit surcharges. See Expressions Hair Design v. Schneiderman, 975 F. Supp. 2d 430, 442 (S.D.N.Y. 2013). The district court held that the law violated the First Amendment as it was impermissibly vague and regulated speech. The district court further concluded that the statute failed the Central Hudson test for commercial-speech restrictions.

On appeal, the court held that New York’s law “regulates conduct, not speech” and divided the First Amendment challenge based on two kinds of dual pricing: the first concerns posting a price on a label while notifying consumers of the surcharge through a separate sign, and the second concerns a merchant’s including two prices on the label and characterizing the price difference as a surcharge. The court declined to “reach the merits” on the latter question citing Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), and held that the law was not unconstitutionally vague. Expressions Hair Design v. Schneiderman, 808 F. 3d 118 - Court of Appeals, 2nd Circuit 2015

Then the Supreme Court took the case. EXPRESSIONS HAIR DESIGN, ET AL., PETITIONERS v. ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL OF NEW YORK, ET AL. , No. 15-1391, [March 29, 2017]

"Each time a customer pays for an item with a credit card, the merchant selling that item must pay a transaction fee to the credit card issuer. Some merchants balk at paying the fees and want to discourage the use of credit cards, or at least pass on the fees to customers who use them. One method of achieving those ends is through differential pricing—charging credit card users more than customers using cash. Merchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In N. Y. Gen. Bus. Law §518, New York has banned the former practice. The question presented is whether §518 regulates merchants’ speech and—if so—whether the statute violates the First Amendment. We conclude that §518 does regulate speech and remand for the Court of Appeals to determine in the first instance whether that regulation is unconstitutional."

CREDIT CARD SURCHARGES - PART 2

People v. Fulvio, 136 Misc. 2d 334 - NY: City Court, Criminal Court 1987:

"Nor, as the People here contend, is the statute saved by the semantic gyration of claiming that it contemplates the establishment of a "regular price" for a product, that a "discount for cash" from that "regular price" is permitted and that it is only the "surcharge", or additional charge, for use of a credit card, which is prohibited. The fact of the matter is that, at least for this product, there is at the "gas" pump, a legally permissible "cash price" and a legally permissible "credit price" — that fact is amply established by the position taken by the People and the evidence in this case, as well as by the authorities above cited. What is intolerable is that the gasoline station operator careful enough or sophisticated enough to always characterize the lower of these prices as a "discount for cash" may enter his automobile at the end of his business day and drive home a free man; however, if the same individual, or his colleague operating the station down the street, or his employee is careless enough to describe the higher price in terms which amount to the "credit price" having been derived from adding a charge to the lower price, he faces the prospect of criminal conviction and possible imprisonment.

Thus, what General Business Law § 518 permits is a price differential, in that so long as that differential is characterized as a discount for payment by cash, it is legally permissible; what General Business Law § 518 prohibits is a price differential, in that so long as that differential is characterized as an additional charge for payment by use of a credit card, it is legally impermissible. In each case the innocent and the criminal conduct is based upon the same factual configuration. General Business Law § 518 creates a distinction without a difference; it is not the act which is outlawed, but the word given that act. The Bard had the phrase (of course) for the defendant's best defense to the surcharge offense alleged here: "Oh, be some other name! What's in a name? That which we call a rose/By any other name would smell as sweet" (Shakespeare, Romeo and Juliet [2.2: 42-44]) or, in this case, as bad.

The motion to dismiss the charge of attempting to violate General Business Law § 518 is granted, the conviction thereon is set aside and dismissed and the defendant is discharged."

CREDIT CARD SURCHARGES - PART 1

New York Consolidated Laws, General Business Law § 518. Credit card surcharge prohibited:

" No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means. Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed five hundred dollars or a term of imprisonment up to one year, or both."

CREDIT CARD SURCHARGES IN NEW YORK

In Expressions Hair Design et al v. Schneiderman et al, 808 F.3d 11 (2d Cir. 2015), the court revived a New York state law banning surcharges on credit card purchases.

General Business Law §518 states that no seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means. Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed $500 or a term of imprisonment up to one year, or both. Confusingly, the law does not prevent retailers from charging different prices to customers paying with cards vis-à-vis those paying with cash—the law only prevents surcharges. Retailers will still be allowed to provide cash-paying customers with discounts off the full price. So, while a hair salon like the one in this case cannot advertise $20 haircuts and charge credit card users $22, it can advertise $20 cuts and charge cash payers $18.

A petition for a writ of certiorari filed was filed on April 5, 2016 and a response is now due August 1, 2016. Brief amicus curiae of Marion B. Brechner First Amendment Project was filed on June 7, 2016.