From the Blog

February 8, 2018

Tomāto, Tomäto: Businesses and Credit Card Surcharges

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You say “Tomāto”, I say “Tomäto”, a glass being half full should have the same meaning as being half empty, and a “surcharge” to one customer should be the same as a “discount” to another…but is it?

Florida law generally prohibits a seller from charging a surcharge to customers who pay by credit card. However, the law allows sellers to offer discounts to customers who pay with cash as long as the discount is offered to all prospective customers.  An exception to the general rule is that governments and municipalities are allowed to charge a convenience fee or surcharge, but that exception is not applicable to private businesses.  (See Fla. Stat. § 501.0117)

Surcharge Constitutionality

In 2014, a lawsuit was filed against the State of Florida by small businesses challenging the constitutionality of this law.  Cunning lawyers made the clever argument that the right to free speech was violated, because the statute prohibits or permits the surcharge for credit card payments (or discount for cash) based primarily on the words used to describe the pricing.

The United States District Court ruled in favor of the State, upholding the law.  The plaintiffs appealed, and the United States Court of Appeals for the Eleventh Circuit reversed the District Court’s ruling and concluded that the Florida law is unconstitutional.  The Eleventh Circuit remanded the case to the District Court.  The State appealed the case to the United States Supreme Court, but in 2017 the Supreme Court denied the State’s petition.  The District Court has not yet acted on the mandate.

The Eleventh Circuit agreed with other courts that have held similar statutes in other states to be unconstitutional, including statutes in New York and California. While Florida’s state courts will most likely be persuaded to follow the decision of the Eleventh Circuit, there is a conflict in Florida case law about whether the opinion should be considered binding on Florida’s state courts.  Until binding state court precedents come available, or the United States Supreme Court takes the case, there is not complete certainty that the Florida courts will follow the Eleventh Circuit.

Credit Card Contracts and Surcharges

In addition to the law, whether a seller can charge a surcharge may be controlled by the contract with a particular credit card company.  Before making decisions about whether to charge a surcharge, a seller should review the credit card company contract and seek legal advice.

The recent court rulings indicate change is in the wind, but there remains uncertainty in Florida whether the State will follow the Eleventh Circuit’s conclusion that the law is unconstitutional.  Until further determinations are made or the Florida legislature changes the law, sellers electing to charge a surcharge are proceeding at their own risk.