15571 views | 43 | Last updated on Mar 10, 2020 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 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.
Sec. 604A.0021. IMPOSITION OF SURCHARGE FOR USE OF CREDIT 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.
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 issued an order that permanently enjoined the State of Texas from enforcing the law prohibiting credit card surcharges (Sec. 604A.0021) against certain merchants that had sued the Attorney General. In his final judgment, Judge Yeakel wrote:
IT IS ORDERED that Defendant Ken Paxton, Attorney General of Texas as well as his employees, agents, and successors in office, are hereby ENJOINED from enforcing Texas Business and Commerce Code section 604A.0021 against [the plaintiffs].
Read the court order issued on August 16, 2018 [PDF]. Read the permanent injunction and final judgment also issued on August 16, 2018 [PDF]. The case is Rowell v. Paxton, number 1:14-cv-00190, and you can find a copy of the case's docket entries on CourtListener.com or on PACER.gov.
This November 2018 article by Dave Lieber with Dallas News provides some context and background on the litigation.
In June of 2019, the Texas Attorney General issued an opinion in response to a county auditor's request — Opinion No. KP-0257 [PDF]. In this opinion, the Attorney General describes the 2018 litigation and mentions that there are still situations where the law could be enforceable:
When a court determines that a statute is unconstitutional as applied, it normally invalidates the statute only as applied to the litigant in question and does not render the statute unenforceable with regard to other litigants or different factual circumstances. [...] Thus, circumstances may still exist where, as applied, section 604A.0021 operates to prohibit a credit card surcharge fee.
Also note that it is possible the agreement or contract between a merchant and a credit card or payment processing company may prohibit surcharges or fees.
We often receive questions asking who qualifies as a merchant or a seller and who qualifies as a buyer. Because the library is 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 [PDF] (KP-0095). In June of 2019, the Attorney General issued an opinion discussing the law in relation to a county contracting with a private entity for the collection of money owed to the county [PDF] (KP-0257). 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.