WASHINGTON – CUNA filed an amicus brief Thursday in the U.S. Court of Appeals for the Eleventh Circuit, in a case the trade group says raises many of the policy issues surrounding credit card interchange fees.
The case, Dana's Railroad Supply v. Bondi, involves a First Amendment challenge to Florida's ban on merchants surcharging users of credit cards.
The retailers bringing the lawsuits argue that price determination is a form of free speech, and that in banning surcharges, merchants are unable to protest interchange fees, which they deem to be too high.
“CUNA believes allowing merchants to add additional surcharges to credit card transactions would allow merchants to shift the cost of these payments to consumers and financial institutions, while still receiving the substantial value of participating in the system,” CUNA said.
“Credit unions face numerous costs by offering and processing credit cards, and have limited chances to recoup those costs,” said CUNA’s Robin Cook, senior director of advocacy and counsel for special projects, in a released statement. “Funds generated through credit card programs are able to subsidize other consumer-friendly products at credit unions, such as free checking accounts, as well as fraud protection and technology costs for settling transactions.
Surcharging was prohibited under federal law until the statue expired in 1984. After that, Visa and MasterCard banned surcharging as part of their network agreements. A 2013 antitrust case caused the bans to be removed from those agreements, making the state bans more relevant.
Credit unions, which are generally smaller financial institutions, face numerous costs by offering and processing credit cards. Interchange fees help ensure that card programs are economic for credit unions, CUNA emphasized. A surcharge on credit card transactions, CUNA argues, could lead to consumers using credit cards less frequently, instead opting for other forms of payments. This could force credit unions to exit the credit card market, making it more difficult for them to compete with larger financial institutions to attract and retain members, the trade association stated.
Three other cases across the country are pending, in New York, California, and Texas, all involving similar arguments as the Florida case. The New York Credit Union Association has filed an amicus brief for the case in that state, which is under appeal. The Texas district court has ruled surcharges to be unconstitutional, and the California case is still pending.