US Court rules Kansas credit card surcharge ban unconstitutional

Kansas has prohibited surcharging for decades, but a February 25, 2021 successful challenge changes that. Like many other states that had old statutes regarding surcharging, courts are ruling in favor of plaintiff’s. The U.S. District Court for the District of Kansas a part of plaintiff’s motion for summary judgment in an action concerning whether a state statute that bans credit card surcharges violates the First Amendment.

EXCERPT: “As aptly stated by Judge Tjoflat in Dana’s R.R. Supply v. Atty. Gen., Fla., 807 F.3d 1235, 1239 (11th Cir. 2015), “surcharges and discounts are nothing more than two sides of the same coin; a surcharge is simply a ‘negative’ discount, and a discount is a ‘negative’ surcharge.” It is comparable to permitting a restauranteur to serve “half-full” beverages but not “half-empty” beverages. Id. at 1245. Kansas prefers to label the lower price attendant to cash purchases a “discount” and so prohibits Plaintiff from labeling the higher price of credit purchases as a surcharge, even though both describe the same state of affairs: cash purchasers pay less and credit card purchasers pay more because of the cost associated with using credit cards. Again, as Judge Tjoflat pointed out, such a law does not ban surcharges; it merely targets expression and could be called a “surcharges-are-fine-just-don’t-call-them-that-law.” Id. at 1245. This elevation of form over substance, which fails to directly and materially advance any substantial state interest, unjustifiably infringes on Plaintiff’s right to convey information to consumers in a way that truthfully and accurately describes the transaction and allows consumers to make an informed choice. “The First Amendment prevents staking citizens’ liberty on such distinctions in search of a difference.” Id.
On a case within its jurisdiction, and upon the filing of an appropriate pleading, the court may declare the rights of an interested party seeking such a declaration. 28 U.S.C. § 2201(a). Based on the uncontroverted facts, Plaintiff has shown that K.S.A. 16a-2-403, as interpreted in Kansas and as applied to Plaintiff, violates Plaintiff’s rights under the First Amendment. The court concludes Plaintiff is entitled to a declaratory judgment to that effect.

For more information, see Surcharge law resources under Merchant Alerts & Rules Links or contact your acquirer for accurate and current information specific to your situation. Neither Christine Speedy nor this web site provide legal advice. Consult an attorney for all your legal questions.

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