Commerce: Merchants
Businesses in Texas, 2 other states seek end to laws banning practice.
in Texas and two other states sue over bans on swipe-fee surcharges.
Merchants in Texas and two other states have filed suit challenging laws that prevent them from imposing extra charges for credit-card purchases, months after settling with the card companies over transaction fees.
The merchants said they filed lawsuits in Texas, Florida and California as part of a campaign to eliminate the laws that they say were enacted at the behest of credit card companies in the 1980s.
Credit-card purchases cost retailers more to process than other forms of payment. The
laws generally allow merchants to charge lower prices for cash transactions, which they can describe as a “discount,” while preventing them from calling higher prices for credit-card payments a “surcharge,” said Deepak Gupta, a Washington, D.C.-based lawyer for the merchants. Gupta contends the laws are too vague and impinge on free speech rights.
The challenges to state surcharge bans are related to nationwide antitrust settlements between U.S. merchants and Visa Inc., MasterCard Inc. and American Express Co. over swipe fees, which are charged to businesses when consumers pay with credit cards.
The $5.7 billion settlement with Visa and MasterCard, approved by a federal judge in Brooklyn, N.Y., in December, allows merchants to impose surcharges under certain conditions.
The American Express settlement won preliminary approval last month. While it doesn’t include a damages payment, it granted businesses freedom to add surcharges to steer customers to less costly debit cards.
About 41 percent of U.S. credit-card users are unaware of the fees, which help pay for rewards programs, according to the complaint. Merchants also pay fees for debit card transactions, which are regulated by the government under the 2010 Dodd-Frank Act and aren’t at issue in the lawsuits filed today.
The Texas lawsuit, filed in U.S. District Court in Austin, names as defendants Attorney General Greg Abbott and Leslie Pettijohn, the state’s Consum- er Credit Commissioner.
Abbott’s office did not respond to a request for comment on the lawsuit.
The plaintiffs include Lynn Rowell, who owns a landscape and garden business in Beaumont; MPC Data and Communications Inc. of Beaumont; NXT Properties Inc. of Orange; and Paula Cook, owner of precious-metals dealer Montgomery Chandler Inc. in Silsbee.
Cook said that to account for the fees, she has to advertise higher prices than she would like. Customers typically spend $5,000 to $10,000 on purchases, making the credit-card fees of 2.6 to 3.5 percent significant, she said.
“We should just be able to say it’s 4 percent,” Cook said, and let customers know “I’m not getting it but I have to charge it.”