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Frequently Asked Legal Questions

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1481 views   |   33   |   Last updated on Nov 28, 2018    Consumer Protection

With certain exceptions, surcharges for using a credit card or a debit card are prohibited by Chapter 604A of the Texas Business and Commerce Code:

Sec. 604A.002. IMPOSITION OF SURCHARGE FOR USE OF DEBIT OR STORED VALUE CARD. (a) In a sale of goods or services, a seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment.
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Sec. 604A.0021. IMPOSITION OF SURCHARGE FOR USE OF CREDIT CARD. (a) In a sale of goods or services, a merchant may not impose a surcharge on a buyer who uses a debit or stored value card instead of cash, a check, credit card, or a similar means of payment.
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The Texas Attorney General's website states that “businesses can discount the retail price for customers who pay with cash.” See the definition of “surcharge” at Section 604A.001(5) for language related to discounts for cash purchases.

On August 16, 2018, Judge Lee Yeakel of the U.S. District Court for the Western District of Texas permanently enjoined the State of Texas from enforcing the law against merchants that had sued the Attorney General. In his order, he stated:

The Texas Anti-Surcharge law as applied violates the merchants' commercial free-speech rights under the First Amendment. The court will grant the merchants' motion for summary judgment and will permanently enjoin the State of Texas from enforcing the Anti-Surcharge law against the merchants.

Because we are librarians and not attorneys, we are not able to interpret the impact of this permanent injunction on individual businesses in Texas. This November 2018 article by Dave Lieber with Dallas News provides some context and background on the litigation.

Also note that it is possible the agreement or contract between a merchant and a credit card or payment processing company may prohibit surcharges.

The case is Rowell v. Paxton, number 1:14-cv-00190. You can find a copy of the case's docket entries on CourtListener.com or on PACER.gov.

We often receive questions asking who qualifies as a merchant or a seller and who qualifies as a buyer. Because we are not able to interpret the law, we can only point you to Section 604A.001 since it defines some of the terms used in Chapter 604A. The library cannot determine if the law is being violated in a specific situation.

In June of 2016, the Texas Attorney General issued an opinion that discusses the law in relation to convenience fees and third-party payment processors (KP-0095). As the Attorney General website states, an Attorney General opinion is a “written interpretation of existing law,” but Attorney General opinions “cannot resolve factual disputes.”

Section 604A.003 describes the penalty for violations:

A person who knowingly violates Section 604A.002 or 604A.0021 is liable to the state for a civil penalty in an amount not to exceed $500 for each violation.

That section goes on further to state that the “attorney general or the prosecuting attorney in the county in which the violation occurs” may bring a suit to recover the civil penalty, but it is important to read the entire statute as it describes other requirements before filing suit.

The Attorney General's website has information about the use of credit cards, and they ask that you file a consumer complaint with their office if you feel that a business is charging extra for credit card purchases.

Note: Senate Bill 560, which went into effect on September 1st, 2017, changed the laws relating to credit card surcharges. Previously, the Office of Consumer Credit Commissioner (OCCC) enforced the law on credit card surcharges, but that is no longer the case.

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