U.S. District Judge Jed Rakoff ruled in favor of a group of retailers last week who challenged New York's surcharge law. The law subjects retailers to criminal penalties if they assess surcharges to customers who pay by credit card instead of cash.
Many retailers in New York assess a surcharge to offset the costs incurred with credit card processing fees. Most store owners have to pay approximately 3% of a transaction to their processing company. Retailers either raise their prices, create surcharges to offset these costs or take less of a profit. The state of New York has been trying to stop these surcharges for some time, but Judge Rakoff of Manhattan has sided with the retailers.
Judge Rakoff said the surcharge law violated the First Amendment by preventing store owners from alerting customers about the fees associated with their purchases. He said the law "perpetuates consumer confusion by preventing sellers from using the most effective means at their disposal to educate consumers about the true costs of credit-card usage."
According to the law, retailers can be subject to a $500 fine and up to one year in prison for imposing credit card surcharges. Rakoff has issued a block on this law until the case surrounding it is completed.