Posted on 03/27/2015 9:11:34 PM PDT by Auntie Mame
SACRAMENTO (CN) - A California law prohibiting a swipe fee surcharge for credit card purchases is unconstitutional, a federal judge ruled Thursday.
U.S. District Court Morrison England found that the law "is an unconstitutional restriction on plaintiffs' freedom of speech and is void for vagueness."
(Excerpt) Read more at courthousenews.com ...
As someone who usually pays with cash, I've always thought it unfair that I am penalized. However, the law in California left merchants no choice. This has now changed and it will be interesting to see how it plays. Anything to keep cash king is good, IMO.
Good news for this stupid state of mine. That’s why gas stations offer cash and card options. It’s cheaper for cash of course.
California is entitled to regulate commerce within its borders under the Tenth Amendment, and frankly, a US District Court has nothing to say about that.
I would argue against the prohibition on the basis of a Takings Clause, if the CA Constitution has one, and argue it in State court.
The feds need put back in the constitutional box it came in.
/johnny
The merchant signs an agreement with the card processor, requiring him to charge the same rates for a cash transaction as is charged for a credit card transaction. The only current exceptions are for wholesale transactions, investments, and gas stations (SOME merchant agreements permit charging more for credit.)
The California law is actually pretty redundant since the merchant agreement already contains the appropriate language.
But this decision is moronic... It's a freedom of speech issue to charge more than the quoted price because of method of payment? That's some creative footwork by a lawyer, and virtually assured to be overturned on appeal.
The 1985 law states that retailers cannot impose a surcharge on consumers who use a credit card instead of paying by cash or check, but the retailer can offer discounts to induce consumers to pay by cash.
Basically, this law said that a retailer can't impose a surcharge on customers who use a credit card, but they are allowed to get away with this if they charge less for customers using cash and describe the price difference as a discount instead of a surcharge. In other words, you can circumvent the law if you simply use the word "discount" instead of "surcharge" to describe your transactions even if the end result is the same.
The court really had no choice but to overturn this law, as it's idiotic on its face.
The banks charge the fees. The banks are interstate. The credit card companies too which act as a sort of umbrella for banks. Don’t get me wrong, I am for free market. That said, 3% plus (often 50 cents to 95 cents) is obscene. We need more competition. Apple pay, google pay cant come soon enough. Hoping more will join the fray and drive down costs.
I think it’s because of the way the law was written back in 1985. The judge in his opinion wrote about the murkiness of the law as it was written: “Plaintiffs cannot frame their price how they would like, even though they are allowed to speak with their customers generally about the credit card industry and the merchant fees that the industry charges.”
This seems to be a very good decision and will benefit everyone in the State of California.
Actually, it is reinforcing existing commercial law in California that requires merchants to charge no more than the retail price for items. If you charge more than retail price, you’d best get the consumer to sign off on it, and know that the consumer’s likely going to prevail in any disagreement about that signing off on it.
And we’re not in the 1950’s where few had cards. This is an ordinary cost of doing business, and should be included in the calculation of a retail price. Merchants, of course, are free to charge LESS than the retail price for goods or services as they wish.
I don’t think this is going to stand up on appeal.
No vendor is obligated to engage in commerce, so it's not prior restraint.
Kali requires special wording at its gas pumps. If a vendor refuses to print those additional non-US EPA regulations -- or if he modifies them to suit his own taste -- does he have the right to do so under "free speech?"
He does NOT. Claiming he does is preposterous.
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Just checking, as I read it, California appears to have a very weak Takings Clause. That probably means under state law the fact that a vendor is required to give up property without compensation can't be extended to payment regulations by the state, although a lawyer will argue anything for a fee.
This is judicial overreach by the Federal bench, and the Ninth Circuit should strike it down. Just because a law is stupid, that doesn't mean it's Unconstitutional.
Thing is, it's not murky at all. California has always had a very strict retail price law. If you're selling the hot toy for Christmas, you're not able to charge more than the retail price if you originally bought the item through a distributor (and hence can sell the item as being new. Used items are a completely different matter, thankfully, in the state...)
If the mechanic gives me a quote for repairs, I fully expect them to charge what they quoted, not get hit by a surcharge because I chose to pay with a credit card.
And the thing is, even if this law is struck down (which I doubt it'll stand appeal), all the person has to do is pick up the phone and tell their bank that they were charged more than the quoted price and demand the quoted price be honored - and the bank will yank the entire transaction amount back from the merchant and force them to show that they charged the quoted price (which they can't as it will include the surcharge for using a card.) The card company will make a singular offer for the merchant to accept the quoted price, and if they debate it, will refund the entire purchase price back to the consumer.
Good luck to the merchant taking the card company to court since this is exactly what they agreed to when they signed the merchant agreement.
However, you're not making a free speech claim, and that is the basis for the decision.
3% is "obscene" as soon as there's someone willing to provide the same service for less than 3%, and not before. If you think that Apple or Google are going to really introduce competition into this arena, you haven't been paying much attention. Both of these companies have atrocious records of illegal price fixing in every market they've ever entered.
You’re reading this wrong. The judge said the state ban on merchants adding a surcharge on credit card transactions is unconstitutional. Merchants are now free to add a surcharge on top of the 2-3% processing charge (most of which goes to the bank that issued the card NOT to Visa or Mastercard.
If Jack's Exxon charges $2.75 for a gallon of gasoline and adds a $0.10 "surcharge" to the price for customers who pay with a credit card, then he's breaking the law.
If Fred's BP/Amoco charges $2.85 for a gallon of gasoline and offers a $0.10 "discount" for customers who pay with cash, he's perfectly OK under the law.
In both cases the prices are exactly the same: $2.75/gallon if you pay cash, and $2.85/gallon if you pay with a credit card. But only one of these two businesses is breaking the law, and only because of the words they used to describe their price structures. That is preposterous on its face.
And actually, I believe the merchant agreement also specifies that they may not accept the card for payment and offer a discount for cash for the same item. That's entirely a private matter, of course...
If the merchant looks at their transaction records, it will show as a Visa or Mastercard (etc) as having been recorded and processed. And most processors count ‘easy pay’ type NFC transactions as being equal to a ‘card swipe’ vs a hand entered number on the keypad.
"For example, a retailer could charge $102 for a product and give a $2 discount, but could not charge $100 and impose a $2 surcharge, despite the situations being mathematically equivalent. Thus, the statute restricts how this $2 price difference is presented to the consumer," England wrote.
Simply because a law is "preposterous" that doesn't make it Unconstitutional. And it also doesn't make it a Federal case.
California has regulations stipulating how a transaction is to be described to the consumer. That's not a free speech issue any more than requiring a food label to contain certain specific information is.
Under the kind of argument you think makes sense, any requirement made on a vendor for the description of a transaction becomes a matter of "free speech." That's nonsense. This judge needs to go back to law school.
You aren’t explaining anything. I know the ruling. He’s a DOPE, and so is anyone else who thinks this is a “free speech” case.
Almost every one I've signed went further to specify that the merchant, so long as they display the Visa/MasterCard/Discover/American Express logo, is specifically forbidden from giving a discount for cash in the transaction.
Naturally, why would they want to undercut their own system by permitting such transactions to occur? Is it enforceable? Likely not, but likely more than acceptable cause to terminate the contract for their accepting cards.
Oddly, Wells Fargo permits a cash discount, but specifically forbids charging more than the marked price for items paid for with the card.
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