For decades, California law has prohibited “retailers” from adding a surcharge when consumers choose to use a credit card instead of paying with cash. A retailer is defined as someone who sells goods or services or anything else of value, but excludes government entities and public agencies (e.g., state, city, or county).
Thanks to U.S. District Court Judge Morrison England, it may soon be more accurate to say California “had” a law prohibiting surcharges for consumers using plastic. Yesterday, Judge England issued a permanent injunction finding California Civil Code Section 1748.1 violated the right to free speech. Yes, you read that correctly. In Italian Colors Restaurant et al. v. Harris, Judge England found that the statute unreasonably restricts merchants’ ability to communicate to their customers that customers are paying higher prices since retailers consider credit card processing fees in setting prices.
While the California Attorney General’s office said they are reviewing the ruling, at this moment in time, the controlling statute is unconstitutional. Nevertheless, business owners are encouraged to wait and see how this plays out before changing their business practices. But, if this ruling stands, many businesses will likely impose a surcharge equal to 2-3% for those who wish to buy with plastic instead of cash.