Florida and New York Clash

November 6, 2015 at 8:53 am Leave a comment

I knew that would get your attention. The clash to which I am referring has to do with the legality of statutes banning credit card surcharges. Earlier this week, the Court of Appeals for the 11th Circuit, which has jurisdiction over Florida, invalidated a state statute that made it a misdemeanor to impose a surcharge on credit card purchases. As readers of this blog will know, the Court of Appeals for the Second Circuit, which has jurisdiction over New York, recently upheld a similar New York statute.

The split between the circuits raises the profile of the issue even more and increases the possibility that the Supreme Court will step in and decide if it is legal for states to impose such bans. The New York Credit Union Association submitted an amicus brief in the New York case arguing that the statute should be upheld.

In Dana’s Railroad Supply v. Attorney General, State of Florida, the 11th Circuit had to decide whether the Florida surcharge ban violated the First Amendment right of merchants to engage in free speech. The statute in question (Florida statute Sec. 501.0117) makes it a crime for a seller to impose a surcharge on a buyer for electing to use a credit card. However, it also allows “the offering of a discount for the purpose of inducing payment by cash.”

In its majority opinion, the Court noted that under Florida’s statutory scheme a merchant who offers the same product at two prices “a lower price for customers paying cash and a higher price for those using credit cards is allowed to offer a discount for cash while a simple slip of the tongue calling the same price difference a surcharge runs the risk of being fined and imprisoned.” Against this backdrop, the Court concluded that the statute violated the Constitution by penalizing merchants based on what they say and how they say it.

In a demonstration of how reasonable people can come to vastly different conclusions, in Expressions Hair Design v. Schneiderman, the Court of Appeals for the Second Circuit reviewed New York’s surcharge ban and concluded that statute does not implicate the First Amendment at all. The way this issue is ultimately decided will have important implications for credit card issuers. Since merchants are no longer barred from imposing credit surcharges in their contracts with Visa and MasterCard, the remaining state level bans are the only way to prevent these increases consumer costs.

Enjoy your weekend. Stay tuned.

Entry filed under: Legal Watch, New York State. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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