Some merchants prefer their customers to pay for their purchases with cash so they can avoid transaction fees associated with credit card purchases Transaction fees can be either passed along to the consumer or absorbed by the merchant.  To encourage payment in cash, many merchants post prices reflecting increased rates for credit card users, and states have long been closely regulating this method of pricing.  In New York, the “no credit card surcharge” law (N.Y. Gen. Bus. Law § 518) made its way to the United States Supreme Court in Expressions Hair Design v. Schneiderman two terms ago.  

The Supreme Court’s opinion in Expressions Hair Design was widely regarded as a preliminary victory for business, holding that § 518 regulated speech and therefore fell under First Amendment scrutiny.  The Supreme Court remanded the case to the Second Circuit for further proceedings consistent with their opinion that § 518 regulates speech.

Over the past eight months, the remanded Expressions Hair Design case has been stalled over the interpretation of § 518.  The Second Circuit certified the question of statutory interpretation to the New York court.  Finally, on October 26, the New York Court of Appeals issued an interpretation of § 518 concluding that if a store chooses to post lower prices for cash customers, it must also post the price charged to credit card customers.  This interpretation prohibits merchants from posting a single cash price for items while indicating an additional amount will be added to credit card purchases.  The Second Circuit will now decide whether § 518 as interpreted by the New York Court of Appeals is a valid restriction on commercial speech.

If the Second Circuit upholds § 518, the case could well make a return to the Supreme Court to resolve the burgeoning circuit split.  Recent cases in the Ninth and Eleventh circuits struck down almost identical statutes as unconstitutional under First Amendment scrutiny.  If the Second Circuit strikes down § 518 as an inappropriate regulation on speech, there would appear to be consensus on how states can draft regulation of credit card surcharge policies.