Understanding Ohio’s Credit Card Surcharge Law: An In-Depth Guide

Ohio’s Credit Card Surcharge Law at a Glance

The Credit Card Surcharge Law, enacted in 2017 with the stated aim of protecting Ohio merchants from credit card companies, allows for the type of fee that most retailers already charge their customers — an up-charge for those who choose to pay with plastic. This "surcharge" of generally 2.5% appears most often on the initial purchase screen of a retailer’s electronic system. It informs customers of the additional charge for using credit cards.
The credit card surcharge is available only to Ohio merchants who are charged interchange fees by card companies. Ohio Revised Code Section 1349.231 provides that vendors may impose a surcharge on all , or any one, of its credit card transactions so long as they disclose their imposition to the public. The transaction records must also include a notice that a surcharge is applied to credit card transactions and the amount of that surcharge.
The law allows merchants to choose to post the disclosure on their website or at the point of sale (POS) if the consumer makes the transaction at their physical location.

History and Evolution of the Credit Card Surcharge Law

The history of the credit card surcharge law in Ohio is complex, marked by legislative changes and challenged constitutionality. Early on, in 1980, Ohio enacted Ohio Rev. 1349.31. This statute prohibited merchants from imposing surcharges on consumers for credit card payments and was an extension of an earlier statute that prohibited merchant discounts for cash payments. In 1986, however, this statute was repealed. A few years later, in 1988, Ohio enacted R.C. 1349.55, which prohibited surcharges on credit card payments but was silent on cash payments. R.C. 1349.55 was intended "to permit discounts for cash or for checks, in order that they not be impermissible by positive implication."
On March 7, 2007, the Ohio Attorney General issued an opinion interpreting R.C. 1349.55 as permitting a credit card surcharge "so long as the merchant imposes a corresponding discount for cash purchases." "It is the Attorney General’s opinion that, unlike the invalidated statutes, R.C. § 1349.55 does not restrict the ability of merchants to add a surcharge for customers who pay for their purchase with a creditcard." Thus, under the Attorney General’s interpretation, the credit card surcharge was permitted so long as the merchant provided a simultaneous cash discount. Given the Attorney General’s opinion, such cash discounts began appearing on sales receipts across Ohio.
In response, an Ohio retailer filed a declaratory judgment action seeking a declaration that the practice of providing a surcharge to credit card users, while providing a discount to cash purchasers is a violation of R.C. 1349.55. The retailer also sought to declare the Attorney General’s opinion unconstitutional on its face and as applied.
The Ohio Attorney General filed a motion to dismiss, but the trial court denied the motion. The Attorney General subsequently appealed to the Twelfth District Court of Appeals. The appeals court determined that a surcharge is not a discount but is simply the price of the item subject to additional charges. The court determined "that by prohibiting surcharges, the plain language of R.C. § 1349.55(A) in effect [with]holds discounts" because it prohibits the increase of prices to a customer who pays by use of a credit card or cash, and "forbid[s] both the imposition of surcharges and the granting of cash discounts." Consequently, a penalty is imposed upon any consumer who elects to pay by cash by "dismantling the essential bargain of a discount for cash" which existed between a buyer and seller.
After the appeals court decision, the legislature enacted H.B. 247 (which became effective in November 2012) to modify R.C. 1349.55 so as to a permit a surcharge to consumers who choose to pay with a credit card so long as "[t]hat the merchant simultaneously offers the same discount in the amount of the surcharge" for those who pay cash. Some business owners have indicated that they do not plan to implement the surcharge and discount as a result of the time and time spent to reprogram their point of sale systems to provide two different prices for the same item.

Impact of the Credit Card Surcharge Law on Businesses in Ohio

CEO’s of Ohio and National Companies Must Comply with Ohio’s Credit Card Surcharge Law by Directly Passing on Their Credit Card Processing Fees. Does it Apply to My Company on Internet Orders from Ohio?
Mezzetta, Giant, Giant Eagle, Rite Aid and Walgreens have received the Ohio Attorney General’s Office letter that now require them to comply with Ohio’s Credit Card Surcharge Law per Ohio Revised Code § 1349.55 by directly passing on their credit card processing fees in Ohio (15 cents to $2.00 surcharge). This is per the letter Attorney General Mike DeWine has sent to nearly 80 national businesses with stores in Ohio. Registration is due in 60 days to certify compliance with the law passed in 2012.
The Ohio Credit Card Surcharge Law only applies to credit card transactions where a business in Ohio directly passes on its credit card processing fee to the customer. It does not apply to a business who incurs the credit card processing fees as a cost of doing business. For example, if a business in Ohio offers to sell a widget for $10 to all customers, but the business accepts cash payment only from customers in California, the California customers are effectively charged $10 for the widget; however, the Ohio customers must pay an additional credit card surcharge fee of 15 cents to $2.00 for payment with a credit card. That is not a direct passing on of the credit card processing fee, but rather a stealth surcharge, and therefore does not violate the law.
The new legislation imposes a fee on customers who use their credit cards. In other words, it is intended to do what was done with gasoline costs in the U.S. begin in 1979 where base prices are shown one place and surcharges (taxes) are shown separately on the receipt. In Ohio, businesses cannot include the surcharge in the price of an item or as part of gross receipts. Comm. On Aging v. Ohio Gasoline Dealers Assn., Inc. (1975), 43 Ohio St.2d 66.
The surcharge must be conspicuously disclosed in one specific manner: visible to the customer when the transaction is initiated (e.g., on the advertisement, sign, or display tag). The size of the font must be at least 10 point type on every such sign, advertisement, receipt, billboard, or other display.
There is no impact on your company if you are selling direct to customers on the internet and charge a set price. If you charge differently based on where the customers resides (free shipping to California but charging shipping plus a surcharge to Ohio, for example), then you need to reformulate the way you sell to get around the Ohio credit card surcharge law.
Ohio’s Credit Card Surcharge Law does not apply to debit cards, instead specifically allowing the use of a debit card without a surcharge, regardless of whether the debit card is processed through electronic means or not.
The statute does not apply to financial institutions making payment pursuant to government requirements.

Legal Protections Afforded to Consumers Under the Credit Card Surcharge Law

Consumers are entitled to the following protections and rights under Ohio’s credit card surcharge law — ORC 1349.27 — in situations where the surcharge is applied to the price of goods or services: If an Ohio consumer is not provided notice of the surcharge in the manner described above, they have the right to enforce these protections in the state courts in Ohio in the county that they reside in or the county where the principal place of business for the entity imposing the surcharge is located. Note that it does not matter if the person who files suit does not live in Ohio, as long as the merchant is located in Ohio.

Consequences and Enforcement of Ohio’s Credit Card Surcharge Law

Section 1345.031(E) establishes that any person or entity that violates the provisions set forth in Section 1345.031 by knowingly charging a surcharge may be considered to have committed an unfair and deceptive act or practice in violation of Chapter 1345 of the Ohio Revised Code. Further, a violation of Section 1345.031 may result in damages under Section 1345.09 of the Ohio Revised Code, which provides: "any person who is found liable in an action brought under sections 1345.07 to 1345.071 . . . of the Revised Code for a violation that is an unfair or deceptive act or practice is liable to the person injured by the unfair or deceptive act or practice for the recovery of the person’s economic loss."
Additionally , a person who is found liable in an action under Ohio Rev. Code § 1345.07 (including violations of Ohio Rev. Code § 1345.031) may have to pay punitive damages if loss to the aggrieved party exceeded the person’s economic loss and all of the following apply: (1) the trier of fact finds by a preponderance of the evidence that the aggrieved party suffered noneconomic loss; (2) the trier of fact did not find by a preponderance of the evidence that the person charged the aggrieved party a surcharge knowingly; and (3) the court considers the award of punitive damages necessary to serve the public interest. Further, upon a finding of liability in an action under Ohio Rev. Code § 1345.07, the trial court must award reasonable attorney’s fees, as determined by the court, to the person bringing the action, if the court determines that the person charged the aggrieved party a surcharge and noneconomic loss to the aggrieved party resulted.

Ohio’s Credit Card Surcharge Law in Comparison with Other States

The Ohio Credit Card Surcharge Law is not unique to Ohio. Under different names, credit card surcharge laws exist in other states, although until very recently, only Maine and New York had laws that prohibited a credit card surcharge but allowed a cash discount. Compare the Ohio law with the laws in Maine and New York:
Maine’s credit card surcharge law, found in 10 M.R.S. § 3009 and in the Maine Regulatory Bulletins available at http://www.maine.gov/pfr/consumercreditbulletins.html, provides that merchants in Maine who establish a cash discount program must do so by "posting price tags at the point of display of the item." Merchants must pay a fee of 0.5% on each cash payment accepted. Thus, cash discount programs are not for free – the state gets a 0.5% piece of the action. Maine’s law was enacted in 1973. Unlike Ohio’s law, Maine’s law has no exception for federal contracts.
New York’s General Business Law §518 imposes a surcharge of 1.75% on merchants who surcharge customers who use credit cards issued by out-of-state entities. Merchants selling to New York residents by mail or telephone that use out-of-state credit cards must be registered with the New York Commissioner of Taxation and Finance. Merchants who sell within New York State with the permission of the Commissioner of Taxation and Finance may charge a surcharge equal to the amount charged by the issuer of the credit card.
The Utah and Colorado laws similarly authorize merchants to impose a surcharge but also permit states to issue implementing regulations. In contrast, the Ohio Credit Card Surcharge Law does not authorize the issuance of any regulations.

The Future of Credit Card Surcharge Legislation

The future of credit card surcharge laws, both in Ohio and across the nation, appears to be a moving target. Already, in the short time since the Supreme Court’s decision in Expressions Hair Design v. Schneiderman, significant changes have occurred. Other states, including California, Colorado, Massachusetts, and Texas have changed their laws to comply with the Supreme Court’s decision. Other states remain undecided. Whether legislation will follow this trend in Ohio now that the case is remanded is uncertain.
Credit card surcharges and their absence are a matter of market forces. With nearly every major retailer offering credit card discounts, this scheme has become synonymous with settling the difference between the cost of accepting a credit card. Merchants who offer credit card discounts can turn this scheme to their defense in litigation that seeks to invalidate those discounts as a credit card surcharge , as the courts are wont to view the scheme as merchants adjusting their pricing based on mode of payment. This seems to be the most sensible approach in light of market realities, but many issues remain.
The next question is: are the windfalls likely to continue? This may depend on three things: the existence of a market, the willingness of industry leaders to take the lead and attempt to change the market, and changes to the market based on legislative or judicial decisions. The Credit Card Rule, requiring merchants to accept cash and noname cards, assures that the market will continue satisfying their customer base with discounts and this scheme for some time. But the promulgation of the Credit Card Rule resulted in some large chains, like Sinclair Ohio and Giant Eagle, ending their credit card discount programs in Ohio. In the wake of that scheme, what will happen to surcharges and their absence after the Credit Card Rule is voided? What happens when those industry leaders can no longer profitably offer such an option? Will others follow suit?