Posted on 03/27/2015 9:11:34 PM PDT by Auntie Mame
SACRAMENTO (CN) - A California law prohibiting a swipe fee surcharge for credit card purchases is unconstitutional, a federal judge ruled Thursday.
U.S. District Court Morrison England found that the law "is an unconstitutional restriction on plaintiffs' freedom of speech and is void for vagueness."
(Excerpt) Read more at courthousenews.com ...
Enforceable is probably a matter of how much you can intimidate a merchant. It used to be fairly common for retailers to post signs at the register with warnings that they would not accept credit cards for any purchase under $X (usually five or ten bucks.) I actually stood in line behind a guy at a retail clothing store who called the 800 number for VISA because the vendor would not budge on that policy for a t-shirt that was like, seven bucks. Minimum purchase restrictions were also a violation of the merchant agreement. Now I see kids hand credit cards over the counter at McDonald's for a milkshake.
It is like anything, you negotiate with the person you want to deal with. If USBankCard won't accept removing the per-transaction fee, you don't sign with them, and you sign with the next person who comes through the door that does offer waiving that fee on transactions below the ‘floor’ level.
It really shocks me sometimes how few merchants actually understand their fees. For a lot of merchants, accepting an ATM swipe under $25 will cost far more than accepting it as a charge, as ATM transactions typically have a set fee per transaction, whereas cards have a much lesser fee per transaction, but also a percentage fee as well (you don't think the credit card companies pay for that cash back stuff do you?)
Heck, very few places even understood the Amex ‘monthly billing fee’ that only cuts in if an Amex customer swipes a card. If they did, few small business would even consider accepting Amex, as that $15 monthly fee to facilitate 3-4 transactions a month just doesn't make much financial sense.
When I was doing retail, I had it down to the penny as to the difference between doing it as a charge and doing it as an ATM. $26.53 was the break even point - above it, if the card said debit, I scanned it as an ATM, below I scanned it as a credit card.
I almost never use cash, I use my Chase for Everything that accepts it. I love the convenience and cash back rewards and the buyer protections.
Here gas stations charge a higher price for gas purchases with CCs than cash requiring walking in and standing on line before pumping, this is a simple solution that any merchant who doesn't want to pay those fees for the convenience can do.
Good thing you’re not an attorney.
You aint kiddin’. I’d have to lose about 100 IQ points to qualify.
“While I don’t disagree with the merchant’s right to set prices however he pleases, I don’t really understand how the decision hinges on “free speech.”
California is entitled to regulate commerce within its borders under the Tenth Amendment, and frankly, a US District Court has nothing to say about that.”
I agree how much you charge is entirely up to the one charging, and they can charge for whatever service you agree to.
There is nothing in the Federal Constitution on the matter and even if it were a form of speech the legislator of California is NOT congress. This is a California matter concerning the California constitution and laws made under. The Federal ‘judge’ had no business even hearing the case, and as such his ‘judgement’ should be regarded as ill-relevant by the people & state of California.
That said I agree with the sentiment, if you want to uses a credit card service you should pay for it, not ask the merchant to pass(’share’) your cost on to everyone else.
“I would argue against the prohibition on the basis of a Takings Clause, if the CA Constitution has one, and argue it in State court.””
if you refer to the last clause of the 5th amendment as it applies to Washington, presuming Californian had a similar clause I don’t see how that effects a private citizen. Both clauses would be about Government compensation of private property for public uses. There is no public uses here the credit card company and the man’s business both are private property, thus any law telling the man how to conduct business would be the subject of California law. If anything at all this would be a freedom of contract issue, but i wouldn’t even go there because there was no contract signed, unless it was between the business owner and the Credit card company agreeing to charge the same rate.
“You aint kiddin’. I’d have to lose about 100 IQ points to qualify.”
lawyers aren’t stupid their just forced to practice with a highly contradictory and generally dishonest set of judge made law’s. No doubt the demand’s intellectual jimastics necessarily just to draw a reasonable or favorable conclusion renders their minds rather amendable to most kinds of nonsense and abuse.
Having taken poly science classes and been force to read over countless judge’s edicts its hard to imagine how anyone trying to work in that world under such a twisted mess of contradictory reasoning retains a mind capable of straightforward and consistent judgement. But a lot of good people do
Walmart was looking into this as well. It’s a battle of lobbyists v. lobbyists. It’s the only way to inject free market competition and end a lot of the cronyist laws on the books.
I don’t need to be a counselor to have an informed reasoned opinion on the constitutionality of a law. I was responding to your comment wherein you said that the state can regulate commerce inside its borders and that the federal court needed to butt out. As you have, I could think of other ways to argue it too. For example, the transmission of the credit card data either in the air or over copper/cable/fiber is regulated too. I am not advocating either way just saying.
As for the question of free speech, CA merchants were not permitted to charge more for credit card transaction, but were only permitted to promote a discount to cash paying customers. This is mathematically equivalent so its not a question of deception, fraud, etc. Question was can the state regulate the way merchants communicate this dual pricing? The court said California may not restrict the free speech of a merchant by proscribing some of the ways in which he informs customers about the difference between cash and credit card prices. As a person who plays an attorney on the internet (/s), I think that is a fair decision and agree on these grounds.
Finally, yes I believe paying 3% (or being charged 3% either way you choose to look at it) is an obscene amount of money for a transaction. It is ironic in many ways the methods that cost banks the least cost us the most. ATM transaction, automatic pin swipes etc have much less risk, human involvement and time & overhead costs than checks or cash transaction yet they cost more “for the convenience”. And its not just 3% there is a flat transaction fee plus a vig (though some are lower, in the 2% range). Whether Apple or Google et al fees are reasonable is a separate question, I mentioned them by name in a series of names because they are well known upstarts but so far they are using many of the same systems. The point I was making was there is a dearth of competition somewhere in that market. You may be right that new comers are charging a lot of money too, but that would be because they can. And that would be the reason they are coming into the market in the first place. It if was efficient and competitive they would have much less incentive to enter the market unless they made it more efficient and could profit by that. If they are truly competitors and if the costs were transparent it should work to drive down prices over time and that would inhibit competition. But I think perhaps these companies are looking to change behaviors entirely, to switch people away from Visa/MC/Amex/Discover and into their own banking systems either as a bridge to their bank accounts or by offering credit terms of their own. Apple surely has the cash to open a credit division.
Yes we do need more competition. I am not sure where the bottleneck may be. The hardware/software? Or is it a question of limited offerings? You only have a few choices Visa/MC etc so they are not incentivized to compete on price.
I suspect Apple would like to ultimately be its own credit card, not as a bridge to the major cc companies. I have a lot of thoughts on that. The iPhone is premium priced, and many say Apple just wants the top end of the market. They do not lower prices, lease out their software or sell their hardware. It is all or nothing, their way or not. They are in an ideal spot to offer credit terms since they likely have a slight edge in terms of the credit-worthiness of their clients. So they may end up being competitive, or they may end up trying to develop a parallel network for transactions whether that would be competitive I am not sure. Their customers don’t seem to mind paying a bit more for perceived value and convenience.
Oh one more thought - the card companies don’t really compete much. A little but not much. They compete for customers but most merchants take all the cards (some don’t take amex due to the fees). Amex charges more but offers points. The card companies charge merchants more if you use a points type visa/mc too, or a business card instead of a personal card. They compete on interest rate to customers but do not compete for merchant fees they charge what they charge so a merchant is not really incentivized to accept one type of visa card vs another. I have seen in some few instances where the merchant has asked for 4% or 5% because of the business/points card, or charged more for the business card than a personal card but that is very rare in my experience and with specialty merchants. Most routine merchants don’t vary their prices at all (unless you ask).
I think the competition is going to come through alternative means of credit expansion. For instance Walmart was blocked from performing the services of currency exchanges. Most poor don’t have a bank account. The working poor most often have little to nothing current accounts as they pay nearly all their income to survive. Walmart’s idea was to chop check cashing fees down to near zero and bring those customers to the store.
It was a foolish regulatory move to side with currency exchanges and cost the poor billions, but then it was Democrats who invented the lottery schemes. That’s an evil tax on the poor as well.
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