Removing Barriers Blog

CUNA files court brief in California merchant surcharge case
Posted September 11, 2015 by CUNA Advocacy

In our third such filing, CUNA has filed an amicus brief in a California court case challenging merchant surcharges on credit card transactions. CUNA filed similar briefs in cases in Texas and Florida. Merchants in this case challenged a state law that prevented them from adding surcharge fees. We said in this and earlier filings that the surcharges unfairly shift the costs of using electronic payments to consumers and financial institutions, while merchants continue to benefit from participating in the system.

The ninth circuit case, Italian Colors Restaurant et al. v. Harris, involves a group of merchants challenging a California state law prohibiting merchants from imposing a surcharge on buyers using a credit card. California Attorney General Kamala Harris has asked the Ninth Circuit to overturn a federal judge’s March ruling that struck down the ban on surcharges.

Merchants claim that surcharging credit card transactions would likely reduce the use of credit cards for payments. If that were to happen, many credit unions and other smaller institutions would re-evaluate their credit offerings and possibly exit the market. This would result in consumers having fewer credit cards from which to choose, forcing them to rely on only a handful of large issuers for credit and debit cards. 

Surcharging was prohibited under federal law until the statute expired in 1984, and 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 are pending in Florida, New York and Texas.  CUNA filed an amicus brief in the Florida district court which has ruled surcharges to be unconstitutional. The New York Credit Union Association has filed an amicus brief for the case in that state, which is under appeal.