news.cuna.org/articles/107504-cuna-card-surcharges-shift-costs-to-consumers-fis

CUNA warns court card surcharges shift costs to consumers, FIs

September 11, 2015

SAN FRANCISCO (9/11/15)--Allowing merchants to add additional surcharges to credit card transactions will shift these costs to consumers and financial institutions, CUNA said in a brief filed Thursday in the Ninth Circuit Court. CUNA’s brief echoes positions in similar briefs filed in interchange fee cases in Texas and Florida.

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.

CUNA argues that allowing surcharging shifts the costs of using electronic payments to consumers and financial institutions, while allowing merchants to continue to receive the benefits of participating in the system.

“This shift would be inappropriate due to the number of benefits merchants receive from participating in the credit card system. Increased sales, the ability to keep staff levels low, the possibility of transactions at any time through automated or online processes, fraud protection and insufficient fund loss protection are all examples of these benefits,” said Michael E. Chase, outside counsel representing CUNA who filed the brief. “Consumers should be protected through standardized pricing so that the posted price is the amount that card users pay.”

Allowing such fees, CUNA argues, could lead to consumers using other methods of payment, presenting a problem for credit unions that rely on interchange fees to fund their card programs, as well as fraud prevention and other costs.

 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.