U.S. SUPREME COURT DOES NOT OVERTURN CALIFORNIA TOWERS’ ABILITY TO CHARGE A CREDIT CARD SURCHARGE

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Back in 2015, a federal court declared that California Civil Code section 1748.1, which bans businesses from charging surcharges on credit card purchases, was unconstitutional and unenforceable.  As a result, the ban on surcharges was lifted and California retailers, including tow companies, are free to offer dual-pricing.  Thus, you can charge one price for customers who pay cash or check, and a higher prices for customers who choose to pay by credit card.  An appeal to this case, Italian Colors Restaurant et al v. Harris, has since been pending before the Ninth Circuit Court of Appeals, but the ban on surcharges in California has remained lifted during this wait.

In late March 2017, the U.S. Supreme Court looked at a similar New York law banning credit card surcharges in Expressions Hair Design v. Schneiderman.  The Supreme Court unanimously ruled that laws – like the one in California – that make it illegal for sellers to impose a surcharge on credit card sales “regulate speech” and thus may be challenged as violations of the First Amendment.  As such, the Court threw out the lower court ruling that had upheld the New York law.  Please note that while the Court did not necessarily strike down state credit charge surcharge laws in their entirety, it is a critical development in that the Court could have upheld them as constitutional and chose not to.  It is suspected that the Ninth Circuit was waiting for direction from the U.S. Supreme Court on the matter, and now that they have it, a decision may be coming sooner rather than later that could settle the matter in California.

IMPORTANT NOTE: It is important that you also check your contracts with dispatching entities to ensure that there are no provisions that also prohibit credit card surcharges.  For example, the CHP TSA contains a provision that expressly prohibits credit card surcharges (Element G.1) for tows initiated under the Rotation Tow Program.  The CHP has expressly stated that they will continue to enforce this provision and thus, a tower cannot charge a credit charge surcharge for a CHP-initiated tow.