United States: New York Officially Eliminates Ban On Surcharges

20 December 2023

by Johnathan Holbrook

Bass, Berry & Sims

View Johnathan Holbrook Biography on their website

This week, New York Governor Kathy Hochul signed into law Assembly Bill No. 2672, which amends Section 518 of the New York General Business Law. The law previously prohibited merchants from imposing a surcharge on customers who elect to pay for goods or services using a credit card. As amended, merchants now are expressly permitted to impose a surcharge in any transaction in which a customer elects to pay using a credit card so long as the merchant does both of the following:

Clearly and conspicuously posts the total price for an item if paying by credit card (i.e., the sticker price must reflect the total price for the item plus the applicable surcharge imposed if the customer pays using a credit card).

Does not impose a surcharge in excess of the amount of the surcharge charged to the merchant by the applicable credit card company for processing a card transaction.

This amendment codifies the decision by the Court of Appeals of New York in Expressions Hair Design v. Schneiderman, 117 N.E.3d 730, 737 (N.Y. 2018), in which the court held that a higher price charged to customers paying by credit card must be posted in total "dollars-and-cents" form, rather than presented as a separate surcharge. This law explicitly allows a merchant to offer a "two-tier pricing system," in which a merchant posts two different prices for a good or service: one for the credit card price (inclusive of any surcharge) and one for the cash price (which excludes the surcharge). As a result of this structure, merchants often raise prices on all goods and services to include the applicable surcharge, but offer a discount equal to the surcharge amount if the customer pays using cash, check, or debit card.