Removing Barriers Blog

CUNA files amicus brief in Texas surcharge appeal
Posted August 05, 2015 by CUNA Advocacy

CUNA recently filed an amicus brief in the U.S. Court of Appeals for the Fifth Circuit, in a case raising many of the policy issues surrounding credit card interchange fees. The case, Rowell et al v. Pettijohn, involves group of merchants challenging a Texas state law governing how they can disclose a credit card surcharge to consumers.

The brief explains CUNA’s support for Texas surcharge ban as a lawful exercise that protects consumers without violating any free speech rights. The retailers bringing the lawsuits argue that price determination is a form of free speech, and that in banning surcharges, merchants are unable to protest interchange fees, which they deem to be too high.

Interchange fees occur when a credit card transaction takes place, and are how credit unions are compensated for making cards available to merchants. As the CUNA brief notes, merchants receive a number of benefits from participating in the credit card system, including being able to keep staff levels low, allowing for transactions at unattended locations like gas pumps or online, as well as protecting them from fraud and insufficient fund losses.

The brief also notes that consumer issues are at play with the surcharges. Funds generated through credit card programs are used to subsidize other consumer-friendly products at credit unions, such as free checking accounts. These programs help bring more consumers into the financial system.

Surcharging could mean fewer consumers would have access to basic financial services, the brief argues. CUNA presents evidence showing this is exactly what happened after the Durbin Amendment.

Surcharging was prohibited under federal law until the statue expired in 1984. After that, Visa and MasterCard banned surcharging as part of their network agreements. A 2013 antitrust case caused the bans to be removed from those agreements, making the state bans more relevant.

Three other cases across the country in Florida, New York, and California, all involve similar arguments as this Texas case. CUNA also filed an amicus brief in the Florida case.