New York’s recently implemented credit card merchant pricing and surcharge law leaves a number of uncertainties for out-of-state sellers who offer services and goods to residents of New York. This law, which was passed on December 13, necessitates that the highest charge a credit card user could possibly pay for a product or service is displayed by the merchant who levies surcharges for the use of credit cards, effective from February 11 onwards.
The legislation obliges sellers to advertise the price of items when other payment methods, such as cash, check or debit cards are used. It establishes that surcharges cannot exceed the amount charged to the company by its credit card processor and that these surcharges can only be imposed on a pass-through basis.
For non-compliance, a penalty of up to $500 per violation can be incurred. The law appears to cover any entity who honors credit or debit cards to purchase or lease products or services. Its intention is to increase transparency for consumers and purchasers who are often uninformed about surcharges until the checkout process.
The new law calls for merchants to display the greatest price a consumer will pay if they use a credit card to buy an item or service. This will mean that any sellers who impose credit card surcharges will need to establish a two-tiered pricing disclosure for every product or service they sell. However, it’s unclear how this legislation will affect sellers who do not reside in New York but whose products and services are available to New York residents. There are questions about whether vendors in out-of-state locations like Texas or California could face liability under the law if they do not provide dual-tiered pricing information.
Based on preliminary guidance from the state’s Department of Consumer Protection, the law looks as if it applies only to businesses based in New York. It does not appear to apply to out-of-state businesses that impose credit card surcharges on customers from New York. But, if the law is solely confined to businesses operating in New York, it confronts some noteworthy concerns:
- From a perspective of internet-based transactions, New York businesses will witness a decline in purchase volume due to the dual-tiered pricing disclosure, especially when consumers naturally opt for the product that appears less expensive.
- New York online sellers might have to devise two different landing pages for products they offer for sale based on the customer’s location, a solution that presents extensive technological and administrative challenges.
- Although the NYDCP’s scope is limited to New York businesses, an out-of-state consumer who alleges deception in pricing disclosures may still bring a case.
- Given the potential of enormous penalties, operational requirements, and the continuing state law provisions that make uniform operational practices difficult, many retailers who previously used surcharges may discard them to avoid possible legal exposure.
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