This week, New York Governor Kathy Hochul signed into law Assembly Bill No. 2672, which amends Section 518 of the New York General Business Law. The law previously prohibited merchants from imposing a surcharge on customers who elect to pay for goods or services using a credit card. As amended, merchants now are expressly permitted to impose a surcharge in any transaction in which a customer elects to pay using a credit card so long as the merchant does both of the following:
- Clearly and conspicuously posts the total price for an item if paying by credit card (i.e., the sticker price must reflect the total price for the item plus the applicable surcharge imposed if the customer pays using a credit card).
- Does not impose a surcharge in excess of the amount of the surcharge charged to the merchant by the applicable credit card company for processing a card transaction.
This amendment codifies the decision by the Court of Appeals of New York in Expressions Hair Design v. Schneiderman, 117 N.E.3d 730, 737 (N.Y. 2018), in which the court held that a higher price charged to customers paying by credit card must be posted in total “dollars-and-cents” form, rather than presented as a separate surcharge. This law explicitly allows a merchant to offer a “two-tier pricing system,” in which a merchant posts two different prices for a good or service: one for the credit card price (inclusive of any surcharge) and one for the cash price (which excludes the surcharge). As a result of this structure, merchants often raise prices on all goods and services to include the applicable surcharge, but offer a discount equal to the surcharge amount if the customer pays using cash, check, or debit card.
A seller that violates the amended law will be liable for a civil penalty not to exceed $500.00 per violation, which may be enforced concurrently by the director or commissioner of a municipal consumer affairs office or by a town attorney, city corporation counsel, or other lawful designee of a municipality or local government.
The amended law is slated to take effect on February 11, 2024.
New York’s “no surcharge” law was the focal point of the 2017 decision by the United States Supreme Court in Expressions Hair Design v. Schneiderman, 581 U.S. 37 (2017), in which the Court ruled that the New York law regulates merchant speech and is subject to First Amendment analysis. That decision sparked activity in the states that, as of the time of that decision, prohibited merchants from imposing a surcharge on customers who elect to pay by credit cards. Since then, many states have repealed or are in the process of repealing laws imposing such a prohibition, as summarized at the end of this article in the summary of the current status of the no-surcharge statutes in those states where such a statute previously was enacted.
This new law provides merchants additional flexibility in determining whether to pass along the cost of accepting credit cards but continues the trend of requiring merchants to conduct a state-by-state analysis to determine whether there are any requirements as to how the surcharge must be presented to the customer.
We will continue to monitor and provide updates regarding state no-surcharge statutes and any related court decisions or legislation as they develop. If you have any questions or any other concerns related to your organization, please contact the author.