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Kansas updates UCCC provisions including credit card surcharges
On March 29, the Governor of Kansas signed into law HB 2247, a comprehensive bill that updated UCCC provisions in an effort to regulate the credit industry more efficiently, and moved provisions from the UCCC to the Kansas Mortgage Business Act, among other things. The bill amended provisions relating to credit card surcharges—allowing retailers and other persons to impose a surcharge on a customer who uses a credit card payment if such retailer or person provided a clear and conspicuous disclosure of the surcharge amount at the point of entry or sale or in advance of the transaction. The bill nearly tripled the “threshold amount” on certain consumer loans and leases from $25,000 to $69,500. The bill also clarified license requirements, among other things. HB 2247 will go into effect on July 1.
New York AB 2672 goes into effect and establishes credit card surcharge provisions
Recently, New York AB 2672 (the "Act") was enacted, and went into effect on February 11. The Act requires merchants that impose a credit surcharge fee to clearly and conspicuously post prices inclusive of a surcharge fee. The Act allows merchants to use a two-tier pricing system, in which two different prices display whether a consumer uses a credit card or another form of payment on a transaction. The Act also establishes a civil penalty not to exceed $500 for each violation.
Court says Kansas credit card surcharge ban is unconstitutional
On February 25, the U.S. District Court for the District of Kansas granted in part and denied in part a plaintiff’s motion for summary judgment in an action concerning whether a state statute that bans credit card surcharges violates the First Amendment. Kansas law prohibits merchants from imposing a surcharge on customers who pay with credit cards instead of cash, and allows merchants to offer discounts to consumers who pay with cash. The plaintiff, a payment processing technology company, provides “software that allows merchants to display prices, including cost surcharges on purchases made by credit card,” which “allows consumers to comparison shop among payment types.” The plaintiff challenged the constitutionality of the law, claiming it is an unconstitutional restriction on commercial speech since it “effectively limits” what the plaintiff and merchants “can treat as the ‘regular price’ of an item and the corresponding information about prices and credit card fees that can be conveyed to consumers.” The Kansas attorney general—who has the authority to enforce the state’s no-surcharge statute—countered, among other things, that the statute furthers substantial state interests by (i) encouraging merchants to charge lower prices to customers who pay with cash; (ii) lowering the amount of consumer credit card debt through the use of cash discounts; and (iii) providing benefits to merchants by encouraging cash purchases, thereby allowing them to receive immediate payments, avoid credit card fees, and incur lower costs.
The court disagreed, ruling that none of the AG’s arguments advanced a substantial state interest—a requirement in order to not be considered a violation of the First Amendment. “Plaintiff's desire to display a single price while informing customers that credit card purchasers will be charged an additional fee would logically tend to support whatever interest the state may have in encouraging lower prices for cash customers,” the court wrote. “The statute nevertheless effectively prohibits this type of disclosure. Clearly, this restriction on speech is more extensive than necessary to further the asserted state interest.” Moreover, the court noted that “‘surcharges and discounts are nothing more than two sides of the same coin; a surcharge is simply a ‘negative’ discount, and a discount is a ‘negative’ surcharge.”