Receipt with extra credit card charge
  • Receipt with extra credit card charge
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It’s late 2014. A young man takes his girlfriend to a Mission Valley yogurt shop. After he decks out a medium cup of vanilla tart with all manner of toppings and his girl opts for a little crumbled graham cracker on her mango sorbet, the couple gets whacked at the counter by a buck-fifty surcharge because they paid with a credit card. That’s in addition to the $7 for froyo.

Jeff Anson

It just so happens the guy works for an attorney and knows the fee was illegal. Next day, he calls the store’s owner, who agrees to stop charging the fee.

For more than four decades, California consumers were protected by a state law, the Song-Beverly Credit Card Act of 1971, that prevented merchants from penalizing credit-card-using customers with a surcharge. Those days ended 11 months ago. A federal judge ruled that banning retailers from charging extra for swiping a card or paying for that $7 cup of frozen yogurt with a credit-card-linked smartphone app unconstitutionally limits merchants’ freedom of speech.

Under the old fee ban, wrote Morrison England, chief of the U.S. District Court for the Eastern District of California, in his judgment of Italian Colors Restaurant, et al. v. Harris, “Plaintiffs cannot frame their price how they would like, even though they are allowed to speak with their customers generally about the credit card industry and the merchant fees that the industry charges.”

Sacramento-based Judge England’s ruling came on March 26, 2015, in a case brought by a handful of plaintiffs — led by an Oakland restaurant called Italian Colors — challenging the state’s longstanding ban on merchant-imposed credit-card fees.

If “surcharges are speech” has a familiar ring to it, you’re not the only one to sense a similarity to the 2010 Citizens United Supreme Court case in which the majority found political spending by organized groups such as corporations and unions to be a protected form of speech. The Citizens United decision led to the creation of the so-called SuperPACs that raise and spend millions to influence elections.

“This [credit-card fee] case along with another Supreme Court case, the Gilbert case, calls into question what limits there are that can be imposed on commercial and corporate speech,” says San Diego attorney Steve Arnold.

Steven Arnold

Arising from another sleeper case from the court’s term (which ended last spring), the Supreme Court’s decision in Reed v. Town of Gilbert jarred municipalities across the country when it was announced June 2015. A church in the town of Gilbert, Arizona, sued the township for limiting the display of signs advertising and directing people to church events. The church prevailed over the town of Gilbert on First Amendment grounds.

Some have interpreted the Gilbert ruling that struck down parts of the town’s signage ordinances as spelling the end of stricter municipal sign codes that have been credited with curtailing the “visual blight” that was created by the arrival of America’s car culture last century.

Despite occasional incursions, San Diego is often presented nationally by urban planners as an example of effective sign-control, especially for having adopted a moratorium on new billboard construction.

“When you look at Citizens United, there were a number of unforeseen circumstances, especially for politics,” says Arnold. “This ruling, particularly the Gilbert ruling, is poised to do the same with restrictions on commercial speech and the rights of consumers. California is known as a consumer-friendly state.”

He points to California’s Unfair Business Practices and Unfair Advertising Practices codes as examples that typify the state’s historically tough consumer-protection laws that could be chipped away by the idea that money is speech.

“So, the question for California is, are these rulings a threat to these strong statutes that underpin our consumer protections?” says attorney Arnold, who fears a permanent overturning of the surcharge ban could lead to further erosion of consumer protections. However, an outcry from consumers has not yet materialized.

That may be due to the fact that, outside of the handful of plaintiffs who challenged the ban in the first place, few merchants appear interested in expressing their newly restored rights by charging credit-card customers extra fees.

Mark Arabo

“Our members all know about it, but it is not something they wish to implement at their stores,” says Mark Arabo, president of the San Diego–based Neighborhood Market Association, the nation’s largest corner-store lobbying and advocacy group. “NMA store members have the highest level of respect for the customers and communities that we serve.”

Expect more financial matters and commercial transactions to have free-speech protections bestowed upon them by courts as the Citizens United era continues to morph, says Arnold.

But if San Diego–based Neighborhood Market Association’s position — with its 2300 members nationwide — is any indicator, there may be little reason to worry about merchants taking advantage of Judge England’s ruling.

“While we respect the liberties of individual store owners to manage their businesses as they see fit, the Neighborhood Market Association would never promote any supplemental costs to consumers,” Arabo says. “Whether this is free speech or not is something to be debated within the courts, not on the floors of our small businesses.”

California Attorney General Kamala Harris filed an appeal to Judge Englands ruling in the Ninth Circuit Court of Appeals on May 24, 2015.

Courts have recently struck down similar state laws banning credit-card surcharges in other states, including New York and Florida. But Harris’s appeal received a possible boost when the Second Circuit Court of Appeals recently restored the New York ban on credit-card fees.

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Comments

AlexClarke Feb. 24, 2016 @ 3:47 p.m.

The majority of people use credit cards to avoid carrying cash. If CC surcharges became widespread there would be a shift of credit card customers from the merchants who charge to the merchants that don't. More proof of how wrong the Citizens United decision was.

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Javajoe25 Feb. 24, 2016 @ 7:06 p.m.

This problem is much larger than most people realize. I went to a local restaurant awhile back, and after enjoying a tasty breakfast I paid with my credit card, leaving a generous tip in cash, on the table. A day or so later, I went on line to check my bank account as I often do, and discovered the restaurant had charged an additional 15%. The charge was "pending" and had not yet gone through. I contacted my bank, Union Bank, and told them the charge was not legitimate. They told me they pay whatever the merchant submits. I asked what was the purpose of a receipt if the merchant can submit a charge for whatever they want? The bank said I could file a claim and initiate an investigation. I made it clear that the charge was in excess of what I agreed to and they should under no circumstances pay anything more. I then called the restaurant and spoke with the manager who tried to tell me it was "the computer." I made it clear if they submit a charge for anything beyond what my receipt indicates, I would file a complaint with the appropriate agencies. I waited and watched as that charge remained in the pending category. A day or two later, the charge disappeared completely. I thought I was getting a freebie as an enticement not to file any complaints, but then the charge reappeared, this time for the correct amount, and processed through as normal. I've had several conversations with the bank and am amazed that they could care less what it says on your receipt. They pay--out of your account of course--whatever charge any merchant submits, with the explanation that you can always file a claim and you will probably get your money back eventually. Am I crazy, or has the train gone off the track? I've also noticed there is now a new sentence that appears whenever I pull up my account on line, that says, "Some charges, such as gas stations and restaurants, may change." Hello? May change? Wtf is going on? Seems like basic bookkeeping has gone out the window and we now play fast and loose.

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AlexClarke Feb. 25, 2016 @ 7:29 a.m.

The reason to use a credit card is that you can dispute any charge. The bank will hold the charge until it is determined if it is legitimate. With a debit card the money is gone and you have to fight to get the bank to put it back. Never use a debit card.

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