By: Garrett Kelly

Image result for touchless credit card

If you ask Andy Williams, it’s the “most wonderful time of the year.”[1] The holiday season is upon us. According to Forbes, in 2018, Cyber Monday recorded total sales of $7.9 billion.[2] This week Cyber Monday broke the record for total sales of $9.4 billion, $2 billion more sales than Black Friday.[3] Of the $9.4 billion in sales, 33% were via smartphones, which is a 46% increase from last year.[4] These sales differences highlights a significant trend in the shopping habits of consumers. In an age where consumers are incentivized to shop online instead of in person, why are consumers punished at the checkout by surcharges and convenience fees?

When you make a purchase using a credit or debit card, online or by phone, we have been convinced that the company is doing us a favor by providing the consumer with the convenience of using a credit or debit card.[5] But who is this convenience truly benefiting? At the end of the day, the convenience is bestowed on the company who is able to reach a much larger market by offering online shopping and credit or debit payment methods.[6] Yet the consumer is the one paying the company for the ability to buy their product.[7] This fallacy defies economics and makes me nauseous.

Luckily, I am not the only one. In 2011, Bank of America planned to implement a $5 monthly charge to customers who used debit cards.[8] Wait, it costs $5 dollars for a consumer to spend their money? The Bank’s plan came to a holt when a courageous customer, Molly Katchpole, petitioned the fee and fostered 306,000 signatures.[9] Weeks later the $5 fee was abandoned. Moreover, Verizon Wireless learned a similar lesson months later when it planned to charge customers $2 for making one-time credit or debit card payments.[10] Again, Katchpole petitioned the fee and again the fee was abandoned, this time only days after it was proposed.[11] These petitions highlight yet another issue surrounding the implementation of convenience fees and surcharges by merchants. Are these charges constitutional?

The Supreme Court first addressed the constitutionality of restrictions on commercial advertising in the form of surcharges in Central Hudson Gas & Electric Corp. v. Public Service Commission.[12] Applying a four-part test, the Court created a standard for determining the constitutionality of governmental regulations on commercial speech.[13] The first consideration is whether the speech in question constitutes false or misleading advertising that is unprotected by the First Amendment.[14] Second, the Court considered whether the legislative restriction on the speech would serve to further any substantial governmental interest.[15] Third, the Court considered how closely the applicable law purported to advance that interest.[16] Finally, the Court questioned the effectiveness of the regulation at achieving the government’s interest.[17] The four factor test set out in Central Hudson provided a key frame work from which states can base their legislation.[18]

Since Central Hudson, a total of 11 states have enacted new laws prohibiting sellers from charging buyers with surcharges on credit card transactions.[19] These states include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.[20] According to Section 518 of the New York General Business Law: “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”[21] In the 2016 U.S. Supreme Court case Expressions Hair Design v. Schneiderman, the Court held that § 518 regulated free speech under the First Amendment.[22] Petitioners in the case were the owners of five New York businesses that challenged the constitutionality of § 518 under the First Amendment.[23] Similar to Bank of America and Verizon Wireless, the owners planned to implement surcharges on customers that used credit cards because of the 3% transaction fees the owners were charged by the credit card companies.[24] The owners planned to offer “single-sticker” pricing that would communicate to customers the surcharge amount for using a credit card as opposed to cash.[25] The petitioners claimed § 518 regulated the way that sellers communicate their prices to buyers and therefore the statute unconstitutionally regulated the sellers’ First Amendment right.[26] The Supreme Court agreed that the statute regulates speech rather than conduct, because § 518 does not regulate all sellers, rather, the statue targets the ways sellers communicate their charges to buyers who use credit card instead of cash.[27] However, the Court choose not to conclude whether § 518 was fundamentally unconstitutional under the First Amendment.[28]

The Court’s conclusion in Expressions Hair Design is unsatisfying for the fact that it failed to address whether § 518 is constitutional under the First Amendment. The result of the Court’s ambivalence leaves both consumers and merchants without guidance. In the wake of such uncertainty, the consumer can only assume that business will continue to use their First Amendment right of “commercial speech,” afforded to them by common law, to hold consumers hostage to the unconscionable convenience and surcharge fees. Fortunately, the First Amendment is not an exclusive right of businesses. Overtime, I am optimistic that our Judicial System will embrace the challenge of determining the constitutionality of these fees and will recognize the demand forced upon the consumer. But until then, just throw it on my tab.





[1] Andy Williams, It’s the Most Wonderful Time of the Year (Columbia Records 1963).

[2] Sergei Klebnikov, Cyber Monday 2019 By The Numbers: A Record $9.4 Billion Haul, Forbes (Dec. 3, 2019, 9:01 AM),

[3] Id.

[4] Id.

[5] See generally Tamara R. Holmes, Convenience Fees: When is it OK to charge extra to use a credit card?,, (Apr. 13, 2017),

[6] Id.

[7] Id.

[8] See Minda Zetlin, Meet-fee fighting vigilante Molly Katchpole,, (Jan. 18, 2012),

[9] Id.

[10] Id.


[12] See Leading Case, Expressions Hair Design v. Schneiderman, 131 Harv. L. Rev. 223 (Nov. 10, 2017); Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 566 (1980); Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017).

[13] See Central, 447 U.S. at 564.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] See supra note 4.

[19] Id.

[20] Id.

[21] Id.; N.Y. Gen. Bus. Law. §518 (McKinney 2016).

[22] See Wayne Streibich & Jonathan M. Robbin, U.S. Supreme Court Rules That New York General Business Law § 518 Regulates Free Speech Provided for in the First Amendment, Blanke Rome: Alert (Mar. 2017). See also Expressions Hair Design v. Schneiderman, supra note 11.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

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