PEP Episode 039 — Surcharging Compliance for Merchants: Dual Pricing and Cash Discount What You Need to Know

Overview

Ever wondered how the payment landscape has transformed from outright prohibitions on surcharges to complex legal frameworks? Join us for an eye-opening discussion with Associate Attorney Leo Arzumanyan, and managing partner Christopher Dryden, who shed light on these intricate changes. We promise you’ll walk away with a deeper understanding of state-specific regulations and the implications they hold for both merchants and consumers. From Minnesota’s new consumer protection laws to New York’s dual pricing allowances, we’ll unravel the tangled web of rules and requirements that govern surcharging practices today.

Leo Arzumanyan takes us on a journey through the nuanced world of credit card surcharging, exploring the challenges merchants face in states with stringent laws and caps. We dissect recent updates from card brands like Amex and their impact on businesses. Discover how California’s “junk fees law” and its exemptions for restaurants are influencing a broader trend towards transparency and compliance. As federal oversight diminishes, states are stepping up, creating a patchwork of regulations that every business owner must navigate.

Our conversation doesn’t stop at the laws; it also extends to the future of payment systems and the decline of cash. We consider the architectural issues of current payment rails and explore alternative cost-effective methods like ACH. Leo shares insights on why class action lawsuits around noncompliance are rare, and we discuss the challenges small businesses face in maintaining compliance across multiple jurisdictions. This episode is essential for anyone looking to understand the legal landscape of transactions and the opportunities that lie ahead in this evolving field.

Transcript

Chris Dryden (00:00):

I like the fact that merchants are being given the freedom of, I’ll give you, for instance, here’s a real practical example. I have to replace my roof, right? I got solar. Part of the reason in one area that I have to replace my roof is because the solar company made a hole. I have to have the solar panels removed and reinstalled. Now I can go to the solar company and they would probably do it for me, but then I’m subject to the solar company’s schedule and I got a roofer who’s got his schedule and the roofer’s way more important. I’m now left with the choice. Do I have the roofer do it and pay him and try to get the money back? Take the delay. I have no good choice. When I look at what’s going on, that choice to me isn’t most optimal. This is the same thing that we’re talking about for consumers or merchants. What does a merchant do? Great. I have some freedom of choice. How good are these choices and do they completely apply to me?

Jeremy Stock (01:08):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode. We’re really excited to have in studio with us today, associate attorney Leo, who’s part of our transactional team, as well as a regular here on the Payments Expert podcast, the founding and managing partner of global legal law firm, Christopher Ryden. Gentlemen, welcome. Today we’re talking about surcharging dual pricing. Everyone’s favorite topic.

Chris Dryden (01:42):

Woo-hoo. Alright. Yeah, so I can kind of kick it off a little bit. Leo is somewhat of an expert in this over the last, I don’t know, 24 months I would say this topic’s gotten really hot and active for a long time there. I mean, anybody in payments would know that’s been in it for a while. Surcharging was something that was really taboo for a long time. A lot of states for a long period of time basically said you couldn’t do it. Then through court cases, through some lobbying with state legislatures, it kind of eased up. There was a court case that basically said that the inability to allow for surcharging was a violation of constitutional due process. And so ultimately there has been a relaxing on it. What we’ve seen recently is it’s gone from complete prohibition to extreme qualifications of particular types of transactions as to some states have caps, and now we’re just talking about the law, not really the card brands.

Chris Dryden (02:56):

Some states have caps, some will allow you only to pass through what you pay. So in conjunction with all of the changes in the laws, there’s also been movement by the card brands. For a long time it was you have to choose whatever it is, and it has to be uniform surcharge across all credit card transactions. It used to be a 4% cap. MasterCard maintains the 4% cap. Visa has gone to 3%, so you have two masters here when at least our clients do that are using electronic transactions for their sales because on the one hand they have to, this is a big subject matter category, but on the one hand, they have to deal with the card brands and whatever their rules are. And then on the other hand, they’ve got consumer protection laws associated with individual state laws. There’s no federal mandate related to this, but it’s very interesting to try to find whose rules or laws you’re following.

Chris Dryden (04:04):

They don’t always align. And then on top of that, there are different types of transactions that might trigger other laws. So there’s the sale of a product, there’s a sale of a service, there’s actually taking a partial payment in for the purchase of a product such as a car for particular industries. When you market in that industry, there are laws already around marketing in that industry to consumers. Now you sort of have to take the card brand rules and the laws and any federal laws related to it that might get triggered because of a type of business. And now analyze all of that. What Leo’s done is as these questions have come into our firm, he’s been the point guy as to run down all the laws and to see what applies and what doesn’t. And really the purpose of this podcast is to give a little bit of an overview, like an introduction to Leo, but then an overview of the subject matter that we’ve been working on that he’s primarily been working on.

Chris Dryden (05:14):

And I’ve actually been able to write his coattails and learn a lot about the research he’s been doing and just sort of formulate more questions that are coming in through our clients because it’s not always just a simple, I’m buying a candy bar over the counter. I mean, there’s a lot of things that go on. So that’s really the purpose of this because in addition to surcharging, we have something called cash discounting, which means that you can give people a discount if they pay in cash or pay by a debit card. And then there’s also all of these consumer protection mandates about how you visually display the fact that you might have two different types of prices, one that includes a surcharge and one that doesn’t. So that’s kind of like an overview of what we’re going to talk about today. Ultimately, I think we’ll just start with the card brand rules. What’s the most prominent for us with our clients? The first stop is looking at what they say.

Leo Arzumanyan (06:15):

And I’d like to actually a little quick say, I mean, maybe we step back and kind of give a quick definition of what surcharging even is. A simple great, I think a lot of people don’t really know what it means. And I think the most simple way to think about it is it’s the act of a merchant passing down the cost of acceptance of processing a credit card transaction down to the consumer. I mean, I think that’s the easiest way to explain that without getting into the granular details of things.

Chris Dryden (06:43):

Yeah, I mean, actually, if you back up even further, a surcharge is just a charge in addition to the price of something. And the question is, is when you’re doing a surcharge on a credit card transaction, Leo’s right? It’s solely whatever the cost of the expenses to take that card in that form of payment.

Leo Arzumanyan (07:02):

And we’ve had questions from clients, can you surcharge debit card transactions? And that’s an absolute no. You can only surcharge credit card transactions.

Chris Dryden (07:10):

Well, actually, I’m going to filibuster for a second. We got an email that I haven’t even sent it over. A client of ours actually got a email from amex that forwarded something in the Amex rules that said that they had to do the surcharge uniform over all Amex cards. And Leo and I started talking about it. It was like, well, I don’t think Amex has a debit card. So I guess it would just be all different types of Amex cards. I don’t know. I’m not fortunate enough to have an Amex card, so I don’t know. I know there’s different levels of membership, so maybe that’s what they were talking about.

Leo Arzumanyan (07:44):

Okay. Yeah, I’ve never seen an Amex debit card. So it might be

Chris Dryden (07:47):

Just

Leo Arzumanyan (07:48):

Uniform surcharge over different types of Amex credit card

Chris Dryden (07:51):

Tier or something like that. Maybe something like that. But it’s interesting because even Amex is kind of flexed, and I’ve never really seen Amex say anything. So there’s even some question as to what is permissible under Amex rules. That’s something I think we’re going to look at now.

Leo Arzumanyan (08:08):

Right? Okay. Yeah, that’s interesting. I didn’t know about that. But generally that’s what surcharging is. And a consumer goes to the store, they see the price of a good or a service if a merchant wants to surcharge, it really comes down to, first of all, what percentage are you attacking on, right? It’s 3% cap. MasterCard, it’s four. But then you have this other issue you have to think about as a merchant that is that some states actually have caps in the books. So I think Colorado is 2% max or the cost of accepting the credit card transaction, New York and New Jersey, it’s the cost of acceptance. A couple other states might have percentage caps. Minnesota I believe is 5%.

Chris Dryden (08:50):

And still there are a couple of states that are just holdouts that will not allow you to

Leo Arzumanyan (08:56):

A couple states that you are entirely prohibited from Surcharging, Maine, Massachusetts, Oklahoma, Puerto Rico, and I think that covers all of ’em. I might be Oh, Connecticut. Connecticut as well.

Chris Dryden (09:06):

Yeah, Connecticut’s the big one.

Leo Arzumanyan (09:08):

So five states at the moment entirely prohibited. So there’s, as a merchant, you have all these things going on. You got to deal with the card brand rules, state law, and then what Chris mentioned earlier, which is now there’s this whole new set of laws coming down in various states where it’s consumer protection and how you display the prices of goods or services. So for example, Minnesota recently passed a law that went into effect January 1st, 2025, where all mandatory fees have to be displayed in a specific way. And then they list all the various ways. I think there’s a sizing requirement, there’s a requirement on the price has to be built in to the reflective price that the consumer sees and so forth. But then they have a three part test that determines what is a mandatory fee. And it’s interesting, me and Chris were discussing potential, I guess almost like a loophole around this law and that a mandatory fee does not include surcharges if the consumer can reasonably avoid a credit card transaction. What does that mean? That just means if a merchant offers a consumer the right to purchase a good or service with cash or debit card, then this new law doesn’t really apply to that merchant.

Chris Dryden (10:27):

Yeah, it was really weird. Leo sent me this long email, asked him for some updates, and I’m reading through the email and he’s asking some really provocative questions, and it didn’t really make sense. And I think what is important to note is that when you read some of the state laws around this subject matter, these are people not in the industry, maybe not familiar with the industry, not understanding. It could be a part, not understanding the industry necessarily. It could be a part trying to do something that looks optically effective, but maybe they don’t really want to put a mandate on people on businesses associated with it or giving them enough flexibility so that they don’t want to make the law punitive. They want it to be something that is maybe best practice. It was really weird the way that the Minnesota law, you would almost need to go back to the legislative notes to see what the purpose

Leo Arzumanyan (11:27):

Of

Chris Dryden (11:27):

What they were trying to accomplish is. So that’s Minnesota, right? That’s brand new. Other states, not so much. New York, it seems fairly penal the way that they operate.

Leo Arzumanyan (11:39):

Yeah, New York, I kind of like the way they did it in terms of at least it’s very clear, right?

Chris Dryden (11:44):

Yeah.

Leo Arzumanyan (11:44):

They established the caps on the surcharging, which is just the cost of acceptance for processing the credit card transaction. And they also implemented in the actual language of the law regarding surcharging that they allow dual pricing. And Chris mentioned earlier, he touched a bit about dual pricing, cash discounting, but really I guess those kind of fall under their own umbrella. And the way I view those is dual pricing is just the method of essentially listing two prices for your good or service. So you got the credit card price and the cash price. And the way New York does it, I think so far might be the most restrictive across the country. But my suggestion for merchants would be to follow New York’s laws because it does look like a lot of states are trending in that direction, and I’d rather be overly compliant than under compliant, if that’s the word or noncompliance.

Leo Arzumanyan (12:37):

And really what New York mandates is that the cost of processing the credit card transaction is built into the reflected price of the good or service. And then if you want to discount from that, if you want to offer your customers a discount for that price, you would offer a cash discount, which would be the second price that they see. So let’s say a price of a good or service is a hundred dollars, but the cost of processing credit card transaction is $3 for that merchant. They built that into the reflected price. So it’s 103, but they offer a cash discount of $3 and listed as a hundred dollars. And I kind of think that framework, if merchants follow that makes the most sense and maybe the easiest way to make sure you’re on top of things.

Chris Dryden (13:22):

Yeah, I agree. But the problem is that the flexibility, the first thing I would think of is a supermarket,

Leo Arzumanyan (13:29):

Right?

Chris Dryden (13:30):

Unless we go to digital signage with everything, that’s a tough one because you get something like inflation and all of a sudden you have to up prices. So what’s the cost even in the labor associated, I mean, we’ve got POS clients and they have, I think the liquor store is the one that has been the most prominent, but liquor stores display their prices. Now, there’s not a million bottles of liquor. It’s not types of liquor I should say, but there’s probably at least 500 various types in a liquor store, if not more. And each one of those needs to have, if you’re in

Leo Arzumanyan (14:12):

New York in right,

Chris Dryden (14:13):

A sign with the credit price and then the cash price. And like I said, with something like inflation where your pricing is really going to change, I think what gets lost is that the law and the way that it operates for clarity to consumers is great, but the burden on the small merchant potentially is something that I don’t necessarily think is considered when they’re enacting these laws. Now, maybe this will be the push that everything has digital signage. I don’t really know what that looks

Leo Arzumanyan (14:44):

Like.

Chris Dryden (14:45):

I mean, we already have enough screens, who fucking knows? But at some point, what would make sense? Look, anybody who’s entrepreneurial, there’s a great business idea for you. If it’s cost effective, I don’t know. But this is one of those situations where the regulation makes sense, but the implementation of the regulation has

Leo Arzumanyan (15:11):

A burden. The cost of clarity comes with a burden. Yeah.

Chris Dryden (15:13):

Yeah, totally. And so that’s why I think New York, in being restrictive though, it’s clear. It’s just tough to comply with because you have to make a decision, can I have an extra employee? Because my cost of potentially having to do this

Leo Arzumanyan (15:27):

Constantly updating the pricing, making sure it’s always reflected accurately. Yeah,

Chris Dryden (15:31):

Totally. And the interesting part was, and I can’t remember, and I do believe it was New York, but I looked at this before because some of the POS people they got, and I think that this is on the card brands too, a little bit, because the card brands send out secret shoppers and they’ll fine if you’re not compliant with how they want to also do this. And the fines, it’s like doing 10 days in jail for going 70, right? I mean, the fines, the amount of the fines don’t really equate to the infraction, but there has to be a clear display and to comply with the card brand rules and the law, the POS providers came up with, well, hey, at the checkout we can give ’em both prices. And the idea was let’s give them both prices in a way. And so I saw a POS provider have this split screen where when the skew code was scanned, it would show it,

Leo Arzumanyan (16:30):

Right?

Chris Dryden (16:30):

And it was a big screen. I mean, this wasn’t a small screen, so it was something that the consumer could really look at and see what the cost differential was. And I am thinking to myself, okay, well, this seems like a good middle ground. And then they just said no. I mean, they said, no, this wouldn’t be compliant. It has to be at where the product is displayed. It can’t be in a checkout process,

Leo Arzumanyan (16:55):

All points of entry, points of sale everywhere. It’s really, I think one of, just to jump in real quick, one of the other main takeaways when it comes to surcharging for merchants, I think another easy way to think about, are you doing this properly? Does the consumer know what he or she is going to pay upon checkout? And one of the common phrases that I keep seeing when I’m researching the laws around surcharging and cash discounting, dual pricing is clear and conspicuous disclosure. And what does that mean? I mean, really just think about it as how clear are you communicating your pricing to the end buyer? And I think that’s an important kind of takeaway when you’re trying to figure out, am I properly complying with all the card brand rules, the state laws, et cetera, that comes up in almost every piece of law that we’ve seen is clear and conspicuous disclosure.

Chris Dryden (17:47):

Well, but the other thing is that dealing with the card brands, it’s private.

Leo Arzumanyan (17:52):

Yeah.

Chris Dryden (17:52):

I mean, we’re not talking, I mean, I think it’s quasi governmental, but that’s

Leo Arzumanyan (17:59):

Given their market power.

Chris Dryden (18:00):

That’s a long conversation for another day. But I do believe that complying with that is totally different than am I actually compliant with a law? So I think the idea around surcharging, dual pricing, cash discounting is this whole, I think where the ambiguity comes in is the display, what you just focus on that clear and conspicuous

Leo Arzumanyan (18:27):

Disclosure

Chris Dryden (18:28):

To the consumer about what’s really going on at a certain point in time. Look, I understand it, especially if you’re doing anything at a distance. I mean, I think the application even would be different maybe between online sales versus in-person sales, right? I, but I don’t think the legislation or even the card brand rules are really well thought out for each. I mean, they’re trying to do something that I think is beneficial, but they’re creating burdens that are unequal. And I think that at some point those will get tested somewhere. The card brands, I don’t think you’re allowed to test anything. They just say no.

Leo Arzumanyan (19:10):

Right?

Chris Dryden (19:10):

But I do believe that if you had some changes in the law, and maybe there’s some test cases associated with that, maybe the card brands would take a cue from that and make its rules be congruent with a state that came out with something that was really clear for all types of sales.

Leo Arzumanyan (19:33):

Right?

Chris Dryden (19:33):

Yeah, I mean, the one that was interesting for us, and I can let Leo talk about this in great detail, but there were a lot of things that were happening in California. We are sitting in California, so this is where our office is. We have an office in Florida as well, but in California it was primarily happening at restaurants. They were just tacking on fees to all sales. It didn’t have to be for a credit card, a debit card. It was a general service fee trying to absorb the cost of inflation and increasing wages here in this state

Leo Arzumanyan (20:15):

Or covid fees. I see those

Chris Dryden (20:16):

A couple times. Yeah, totally. And there were these fees in order to not be non-compliant with the card brand rules more than anything, they were just making the fee on top of the entire ticket price. And I guess it’s been referred to as junk fees. And so California came out with a law, and last year in June, and Leo’s done a ton of research, it was 4 78, and why don’t you take it away? Because there’s been a lot that we’ve actually researched as that law has gone into effect and how it really applies.

Leo Arzumanyan (20:57):

So California SB four, so eight went in effect, I want to say July 1st, 2024, also known as the junk fees law. And essentially what they did was to try to counteract what Chris just mentioned with these tack ons of surcharges that were being improperly added on to the cost of a good or service. And what they did was, again, similar to Minnesota in some ways, or I should say Minnesota copied California in some ways, but all essentially mandatory fees must be disclosed upfront and essentially built into the price that’s being listed. However, they received a lot of pushback with some exceptions, like government shipping costs and government taxes and

Chris Dryden (21:39):

Stuff. Taxes, I think was the,

Leo Arzumanyan (21:40):

Yeah. And they started to receive a lot of pushback, especially from the restaurant industry, which led to, I want to say Senate Bill 1524, which essentially created an exemption to California s SP 4 78 just for the restaurant industry where, okay, this law no longer applies to you in that you don’t have to build in the surcharges into the reflected price of a good or service in the restaurant industry. But again, the pricing has to be clear and conspicuous, and it has to be reasonably tied to the good that you’re providing. So it’s kind of interesting where California went down this restrictive route, but then started to get a lot of pushback and made an exemption for one specific industry. And I’m kind of curious to see, I don’t know

Chris Dryden (22:26):

They’ve done that at other times with payments. So sidebar, the California in and of itself, basically the 10 99 classification, they killed all independent contractors except true independent contractors. There used to be a nine point test based on scope of control, a principle to agent that went away, and it was like a three part test where basically everybody’s an employee unless you’re truly not an employee. And they made a carve out for certain principal agent relationships, including payment process and sales agents and ISOs. So if you lobby hard enough in California, you can get your voice heard.

Leo Arzumanyan (23:10):

You can get

Chris Dryden (23:10):

The exemption

Leo Arzumanyan (23:11):

For sure. Yeah. So I thought that was interesting. And then Chris and I started doing some more research as questions come in from clients, and we also realized there’s an exception for business to business.

Leo Arzumanyan (23:21):

So California SB 4 78 does not apply when it’s a transaction between a business and another business. If it’s a business to consumer, it applies subject to the various exceptions that are outlined in the law. But I just think California SB 4 78, Minnesota’s new law regarding the advertising of a price of a good or service other states, they’re all kind of following this trend of how are we going to make things more clear for consumers? But like Chris mentioned earlier, I don’t think a lot of the legislators that are involved in drafting these laws necessarily know what goes on behind the scenes and don’t really get into the granular level that of how these things operate in the payments industry.

Chris Dryden (24:03):

Maybe even aren’t consumers at this point

Leo Arzumanyan (24:05):

And maybe even aren’t consumers at this point.

Chris Dryden (24:09):

I don’t say it to be mean, but I think the trend, and this has just been things that are happening around us at all times. I am a big proponent of looking at the picture and seeing what it is, not seeing what I want it to be, but just seeing what the picture is. And regardless of who you voted for, Donald Trump is president, and there are a lot of things that are happening and there’s just a process that’s going to play out. But one of the things that is very clear in the first month of his administration is that they want to unravel some of the federal apparatus that they think is overkill. And in the process of doing that, there is going to be a void in stuff like this, consumer protection. I mean, I don’t think the FTC will go away. They’re trying to kill the CFPB.

Chris Dryden (24:57):

So I think that in that void, states will have to step in and there will need to be more state by state regulation, which is a nightmare for anybody who does business multi-state, but it is just something that is happening and that people need to be aware of. And that part of undoing what we have at the federal level to give standardization to some things that’s going to go away, and we are going to get disparate state laws. And that’s just I think going to be a wave over the next couple of decades as kind of the federal government maybe plays a lesser role in some of this subject matter.

Leo Arzumanyan (25:35):

That’s a good point. And I actually want to add on earlier I was talking about some key things that merchants should focus on when it comes to surcharging clearing case speaker’s disclosure. That’s a big one. Kind of some preliminary things that a merchant should be aware of if they want to start implementing this practice of surcharging. The card brand rules require preregistration, so you have to notify, I believe Visa says you have to notify at least 30 days before you implement surging. You have to notify your acquiring bank. So there’s various things like that. Being aware of the caps, 3% with Visa, four with MasterCard, the various disclosure requirements. I know Visa puts out publications, although they don’t update ’em too frequently, so some might be outdated, but they put out publications of suggested signage and verbiage at the point of sale, at the point of disclosure, point of sale, et cetera. Oh, I also, another big one, prohibited extra fees. So essentially Visa and I believe MasterCard is the same. They don’t allow you to list out other fees when you’re surcharging, so you can’t tag on convenience fees with surcharges or tech with surcharges. If you are going to surcharge, it has to be just a surcharge line item on the receipt, separate from everything else, but no other fees tacked on.

Chris Dryden (26:52):

Yeah, that’s really interesting. I hadn’t really thought about that, but a lot of times those fees are duplicative to the surcharge because they are being charged to absorb that cost. So I can see why they would say that. It is interesting the self-reporting requirement because ultimately you’re reporting to Visa, MasterCard that you may not understand all of the rules around surcharging and subject yourself to a secret shopper in a big fine. I would be really interested to see how much money the card brands make off these fines on an annual basis. But

Jeremy Stock (27:23):

That’s another podcast, huh?

Chris Dryden (27:25):

Yeah, that’s another story for another day.

Jeremy Stock (27:27):

I’ve got a quick question for you guys if you don’t mind, because some of this stuff is kind disheartening hearing you both talk about this. Why? Because it does sound why? Because, because here’s why, Chris, it seems to me that if a simple answer was offered, I’m going to throw this at you and I take it, you’re going to tell me, based on what you’ve said already, this is not going to be a compliance. What about a store that literally says you save 3% if you pay with cash on everything in the store? Something as simple as that. It sounds like it’s not in compliance, but to me that makes sense

Chris Dryden (28:01):

And that’s fine, and you can put that in the store, but they still need to know what the cost of the good or service is. Look, that’s like somebody coming to me spending a bunch of money, but then telling me how much they saved off that price. So it’s a good deal because it normally would’ve been this price, but it’s really, well, I went down the street and found that for a quarter of the good deal that you bought, right? Yeah. You still need to know the cost, right? I mean, there still needs to be a clear and conspicuous disclosure of the cost of a good, otherwise you could walk around saying, I saved 3% all day, but really, did you? You know what I’m saying?

Jeremy Stock (28:42):

Yeah. Okay.

Chris Dryden (28:44):

Here’s part of the problem too. I like these podcasts because it kind of provokes thought, I don’t get to have these types of conversations all the time. And one of the thoughts that popped into my mind today is there’s this focus on cash, but cash is going away. And so what do we do to replace the idea of cash? A CH is the cheapest transaction. It’s bank account to bank account. It’s the most secure, it’s bank account to bank account,

Chris Dryden (29:08):

But yet it’s not something that’s readily offered at a point of sale, right? Online, yes. Physically, no, because people don’t carry around their banking information. That’s what the debit card is for. But because the debit card has the card brand logo on it, there’s a cost associated with the transaction. I mean, at a certain point in time, these are architectural issues with how the industry’s evolved and the rails who owns them. Totally, man. And it’s going to be an interesting look. I like the fact that merchants are being given the freedom of, I’ll give you, for instance, here’s a real practical example. I have to replace my roof. I got solar. Part of the reason in one area that I have to replace my roof is because the solar company made a hole.

Chris Dryden (30:06):

I have to have the solar panels removed and reinstalled. Now I can go to the solar company and they would probably do it for me, but then I’m subject to the solar company schedule and I got a roofer who’s got his schedule and the roofer’s way more important. I’m now left with the choice. Do I have the roofer do it and pay him and try to get the money back? Take the delay. I have no good choice when I look at what’s going on, that choice to me isn’t most optimal. This is the same thing that we’re talking about for consumers or merchants. What does a merchant do? Great. I have some freedom of choice. How good are these choices? And do they completely apply to me? And I guess that’s the purpose of what I was trying to say with my roofing escapade is great.

Chris Dryden (31:00):

Consumers are being considered, merchants are being considered. But just because we do something once I actually applaud California, people pushed back said, this wasn’t really practical for us. Can we get this? At least we’re having a discussion in negotiation and other places not so much. I think the harder part is what do you do if you’re a chain store operating in 15 jurisdictions? And I think with the unraveling of the federal apparatus around this stuff, you’re going to have a lot more disparity. It’s going to be interesting. I mean, look, I will tell you this much. We’ll be on top of it. You can call us anytime. We’ll help you out with it, definitely. But it’s going to be an interesting time for a lot of this stuff.

Leo Arzumanyan (31:50):

And I actually have a question for you, Chris, given that you do litigation as well, are you surprised that you haven’t seen many, I dunno, big cases or notes of decision yet regarding this? Or is it just too new and you anticipate we will see some,

Chris Dryden (32:05):

I

Leo Arzumanyan (32:06):

Think we’ll see some stuff frame the path for,

Chris Dryden (32:09):

But the only people that really want to take this on, I thought we would see a lot of class action lawsuits around people being noncompliant. And surprisingly, I have not heard a lot about it. I thought that there was a lot of low hanging fruit. And I guess the question is, is it worthwhile for us to, as lawyers, to be going out and trying to harm small business when we are small business potentially. I don’t know. Maybe lawyers looked at it and maybe that this really isn’t worth my time because there’s not a lot of good associated with this. Right? Or maybe if you’re going after a corporation that’s just acting the way that they are, but I thought we’d see more of it, and I haven’t really heard much on it like you.

Leo Arzumanyan (33:00):

Yeah, same here. So it’s definitely interesting that there’s not more legal backlash when

Chris Dryden (33:05):

It comes

Leo Arzumanyan (33:05):

To

Chris Dryden (33:05):

This. Yeah, I do find it odd, but I do think that this is a hot topic because a lot of people sell on cash discount. They sell on surcharging in states that don’t have prohibitions or regulation associated with it. On a MasterCard transaction, your cost could be 2.75% and you’re allowed to charge four. So it becomes a profit center to a certain degree. I’ve seen people put in surcharge and then have that eat up all the debit costs, so then they have no cost associated with taking card payment. And the fact that we’ve got not one size fits all, it just leaves the merchant in a really precarious place. I don’t know how merchants can be compliant in many respects.

Leo Arzumanyan (33:56):

And one thing I’d like to add on, Chris mentioned earlier, one challenge is going to be if you’re, let’s say you’re a small business and you’re operating in multiple jurisdictions, how are you going to, it’s just going to be really complicated to make sure you’re in compliance. And that came up this morning because we have a client that reached out to us who wants us to review some of the pricing that he has for his goods. And I think he’s a liquor store owner. So he sent us pictures of the labels that they want to use and the receipts. And Chris brought up a good point because we discussed next steps in terms of reviewing what he provided. And he brought up a good point saying, make sure to let the client know in this state, this is how it operates, but in another state, it might operate differently. So the labels you provided us might comply with New York law, but not in another state.

Chris Dryden (34:38):

These are actually POS providers for industry specific businesses. Yeah, I mean, it will depend on where the person’s located. A lot of our clients that this is a main issue in their industry, they want us to create best practices and create different state issues. We’ve even look for automobile dealerships. We’ve been asked about how surcharging is triggered in a transaction that may be covered under truth and lending. I mean, there’s a lot of stuff and there will be a lot of pushback from different industries, but I don’t want to say it’s confusing as much as it’s incongruent, that’s the problem. There isn’t a single rule, there’s no uniform standard across the board,

Leo Arzumanyan (35:34):

Which would make things a lot easier if it

Chris Dryden (35:35):

Was for sure. And it would be helpful. I mean, it would mean that we probably have less work, but hey. But this has been a very interesting way to watch card brands aside, states try to adopt rules to really accommodate something that’s a market condition. And I find it fascinating to watch how different people look at it. And I’m sure there’s just going to be a lot more metamorphosis of this as it continues to grow.

Jeremy Stock (36:14):

Yeah. Well, this was a great conversation, gentlemen, and as we come to the end here, I want to give you guys the last word. Of course. What is something, it sounds like we are able to help, we can provide this research, and it sounds like there’s going to be a lot of it state by state maybe with you, Leo, give Chris the last word. What are the questions you’re getting most often and maybe what states are being most implicated typically in your research so far?

Leo Arzumanyan (36:41):

Yeah. I mean, I’d say the most frequent questions are a lot of what we talk about today, surcharging, how do you properly implement a surcharging program? Can I surcharge like this? And they show us examples of how they’re doing it, and then we review and we go really in depth. We review all the documents, clients provide us all the labels, receipts, and really get down to a granular level. So I think there’s no one question that’s most frequent. I think it’s just a lot of questions around this topic. And I would say, as Jerry mentioned, I’m a transactional attorney at the firm, Chris is as well, and we really go deep on the compliance aspect of this issue. So if you’re a merchant who’s thinking of implementing surcharging, I would suggest don’t go doing this on your own without really having a legal professional. Review your documentation, reach out to us. We will go through every piece of paperwork that you give us, the labeling, the receipts, ask you how you’re planning to implement it, what states you’re planning to implement the program and get you, we’ll give you our white papers on the issue. We constantly update documentation that is in line with industry trends and the evolving landscape. In terms of this, what was the second question? You asked the states that are most,

Jeremy Stock (37:56):

Yeah, what states are most implicated?

Leo Arzumanyan (37:59):

I mean, California, New York, those are the big ones. I anticipate we’re going to see a lot more from Minnesota

Chris Dryden (38:06):

Soon. I think we will see places where there’s consumer protection. Illinois is a consumer protection state. Washington’s a consumer protection state. I think we’ll start to see all of these things. I think it depends on how big of an issue it becomes locally and how much local response, and I say local, I mean by state, like local response. There will be how much commerce the state has. I’m sure Wyoming, this isn’t a big,

Chris Dryden (38:35):

But I just think it’s going to depend, but I agree with Leo, but I think even more so on or less so on the merchant level. Look, if you’re an industry participant and you are in between the merchants and the payment processors and you are out there and you’re selling and you want a value add to your sales process, learning as much about this subject matter on the level that we learn it is probably important. And I would suggest that if you want to have a conversation with us, figure out how you’re operating, where you’re touching merchants, how you can build out even a sales pitch associated with it, or documentation on best practices to truly be a resource for the merchant to help them with their business calls.

Leo Arzumanyan (39:31):

Yeah, you don’t want to have a process built out that’s not compliant and then have to come to us and we have to redo everything. I think it’s better start from the beginning, get it all down, make sure you’re in compliance from the get-go, and then go out there and market with your marketing.

Chris Dryden (39:43):

Yeah, I mean, it can be a tool that could really help post conversions with merchants. Definitely.

Jeremy Stock (39:48):

Awesome. This has been the Payments Experts podcast, a podcast of global legal law firm. Thank you so much for listening this long. See you in the next one. Are you

Leo Arzumanyan (39:56):

Chairman? Nice. Are you going to leave me hanging, man? Yes.

Jeremy Stock (40:01):

Thank you for listening to this episode of the Payments Experts Podcast, a podcast of global legal law firm. Visit us online today at globallegallawfirm.com.