While Aiwyn can support your payment strategy, we don’t provide legal advice. We recommend working with your firm's legal counsel to ensure compliance with state-specific surcharge laws.
There are certain states in the US who have legislation that has made it illegal to pass credit card surcharges onto their residents.
You have two options:
- Accept cards with billing zip code within an Excluded State, but do not pass the fee onto them and instead absorb the fee (fee will be swept from the transaction similarly to ACH or Debit Cards)
- Do not accept cards with a billing code within an Excluded State, client cannot process the payment and are informed that their card cannot be accepted and to use a different payment method.
Current State Legislation regarding Credit Card Surcharging
Connecticut(prohibited; discount permitted)
Surcharges are banned. C.G.S.A. § 42-133ff.
Maine(prohibited; discount permitted)
Surcharges are prohibited. Me. Rev. Stat. Ann. Tit. 9-a, § 8-509. Efforts to repeal this law have been unsuccessful so far.
Massachusetts
Massachusetts General Laws chapter 140D, section 28A(2) provides that “[n]o seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”
The Division of Banks has considered similar fact patterns involving the permissibility of merchants engaging third-party service providers to process customer credit card payments for a fee. See Opinions 08-041 and 11-017. In those opinions, the Division set forth principal criteria that it evaluates in such requests. These criteria are:
- That the consumer has the choice as to whether to pay by credit card through the third-party service provider;
- That any additional costs, including the convenience fee, that are associated with processing the credit card payment by the third-party service provider are paid directly to the third-party service provider;
- That the third-party servicer provider is a completely independent company with no other relationship to the merchant;
- That neither the merchant nor any of its employees may receive any direct or indirect compensation or consideration – in any form – from the third-party service provide or any other party; and
- That neither the merchant nor its employees have any relationship with the third-party servicer provider or any affiliate, subsidiary, or related party.
Your firm’s arrangement with the Processor (Aiwyn) satisfies the above-referenced criteria. It is of the opinion of the Division of Banks that the processing fee is not in violation of G. L. c. 140D, § 28A.
Reference Source: Opinion 19-010
New York(ban does not apply to charges disclosed as “total dollars-and-cents”)
Surcharges are prohibited unless the merchant displays dollars and cents. N.Y. Gen. Bus. Law § 518. The constitutionality of this statute has been at issue for a few years, with one case winding its way up to the U.S. Supreme Court, back to the Second Circuit, and then over to a state appellate court to answer a certified question of law. The state court held that surcharges are permitted if the merchant “posts the total dollars-and-cents price charged to credit card users” and not just a percentage. Schneiderman, 32 N.Y.3d 382, 393-94 (N.Y. App. Ct. Oct. 23, 2018) (ruling that posting just the surcharge percentage requires consumers to engage in arithmetical calculation and is prohibited by statute). There are also bills pending in New York that would repeal the ban, with other bills proposing a 4% cap. See, e.g., S.B. 4018, S.B. 4035, S.B. 1394, S.B. 314.
Other States(surcharge bans deemed unconstitutional or likely unconstitutional but laws remain in effect)
The following states have statutes banning surcharges. But as you will see in the citations, a federal court in each state (or in the case of Oklahoma, the state attorney general) has deemed the statute unconstitutional as applied to certain merchants. Kansas and Texas also have bills pending that would repeal the ban.
- California– Cal. Civ. Code§ 1748.1;but see Italian Colors Rest. v. Becerra, 878 F.3d 1165 (9th Cir. 2018) (ban violates First Amendment)
- Florida– F.S.A.§ 501.0117;but see Dana’s R.R. Supply v. Bondi, 807 F.3d 1235 (11th Cir. 2015) (ban violates commercial speech rights)
- Kansas– K.S.A.§ 16a-2-403;but see CardX, LLC v. Schmidt, 2021 WL 736322 (D. Kan. Feb. 25, 2021) (ban deemed unconstitutional). There is also a bill pending that would repeal the prohibition. H.B. 2316.
- Oklahoma– 4A, Okla. Stat. Ann.§ 2-211;but seeOkla. Att’y Gen. Op. 2019-12,2019 WL 7046026, *11 (Dec. 17, 2019) (statute is likely unconstitutional). Please note that this opinion is not binding on courts or the attorney general’s successors.
- Texas– TX BUS. & COM. §§ 604A.0021, 604A.001;Rowell v. Paxton, 336 F. Supp. 3d 724, 732 (W.D. Tex. Aug. 16, 2018) (granting merchants’ motion for summary judgment andpermanently enjoining the State of Texas from enforcing the anti-surcharge law against the merchants). There is also one bill pending that would repeal this surcharge prohibition. H.B. No. 3941.