On November 15, 2024, the Federal Trade Commission (FTC) published its final “Rule Concerning Recurring Subscriptions and Other Negative Option Programs” (the “Rule”), part of which includes what the FTC refers to as the “Click to Cancel” rule. This far-reaching rule applies to most automatically renewable contracts and thus is poised to have a significant impact on millions of businesses in almost every imaginable industry—unless the incoming Trump administration rescinds it or rolls back enforcement before it even gets underway.
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Sweeping Changes to Surcharging Practices in New York
This week, New York’s new surcharging law went into effect, replacing the prior surcharge ban which had been attacked at the U.S. Supreme Court (as discussed here). The old law was simply a wholesale ban on credit card surcharges, although since being reinterpreted by the New York Court of Appeals in 2018, it has not been enforced categorically. The new statutory language appears to be an attempt to codify the Court of Appeals’ interpretation under which surcharge programs are
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Payment Processing Contracts and COVID-19
The commercial slowdown wrought by the global pandemic COVID-19 has left many in the payments industry wondering how the virus will affect their existing processing agreements. Depending on which side of an agreement you are on, you may be worried about breaching your contractual obligations or about the other party not being able to perform its end of the agreement. Likewise, you may be looking for a way to get out of the contract without being in breach, or, alternatively, nervous that COVID-19 will present an opportunity for the other side to legally terminate.
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Merchant Found Not Liable for Data Breach Assessments
A federal court’s interpretation of a merchant contract resulted in the merchant not being liable for card brand security breach assessments. It may be worthwhile to examine and revise your merchant agreement in light of that ruling.
In Specs v. First Data, decided June 2019, the US Court of Appeals for the Sixth Circuit ruled that the limitation of liability clause in First Data’s merchant agreement took precedence over the agreement’s indemnification clause, and therefore that the merchant was not liable for card brand penalties. The indemnity obligated the merchant to reimburse First Data for any losses arising out of merchant violations of card brand rules, whereas the limitation of liability exempted the parties from indirect and consequential damages. The court found that card brand penalties qualified as consequential damages.
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Oklahoma AG: Surcharges OK
Recent opinion provides welcome clarity on Oklahoma’s position on surcharge ban enforceability, relating to electronic payment processing
Judicial developments surrounding the legality of credit card surcharging have made keeping up with the latest news on this issue a challenge. Currently, there are several states with laws in place prohibiting surcharges. Merchants have challenged the constitutionality of these laws in court, sometimes with some confusing results.
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GDPR Applicability to U.S. Merchants, Processors and Acquirers
The EU General Data Privacy Regulation (GDPR) was adopted in 2016 and went into effect on May 25, 2018. The GDPR is a framework regulation that is designed to provide a uniform regime to protect the privacy of an individual of the European Union (“data subject”) whose personal data is collected, stored, or processed.
The GDPR is extremely broad in scope. Accepting or processing payments may be classified as the collection and processing of personal data under the GDPR. As such, any company involved in processing payments from consumers should take steps to determine whether they or any of their business partners are collecting, storing, or processing personal information of a data subject.
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The California Consumer Privacy Act
Following closely on the heels of the EU’s General Data Protection Regulation (GDPR), California recently enacted its own consumer privacy law called the California Consumer Privacy Act of 2018 (CCPA).
The law, which requires protection of personal information of California residents, was passed in June and then amended in late September. Merchants and payment processors will be affected by the CCPA, even those that are not based in California. Businesses will need to think closely about what types of data they collect and how they store and transmit such data. They will also need to establish processes for dealing with consumer requests.
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Texas Latest State to have Surcharge Ban Declared Unenforceable by Federal Courts
In March 2017, the United States Supreme Court issued its opinion in Expressions Hair Design v. Schneiderman, on a challenge to New York’s law prohibiting credit card surcharges. The Supreme Court held that the law restricts merchants’ speech by banning surcharges while allowing cash discounts—two similar business models that differ only by how a merchant’s pricing can be communicated to customers—and then sent the case back down for the lower court to determine whether this particular speech restriction is lawful or not. This case remains pending (the New York state court was consulted to interpret the state statute, and we are still awaiting its response), but other federal courts have already relied on this decision to invalidate equivalent laws in other states.
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Surcharges, Convenience Fees, & Cash Discounts
It’s hard to be a cash-only business, especially when businesses are expected as a matter of course to accept credit and debit cards. But processing fees can make merchants hesitant to sign up for transaction processing services, and many payment processors want to offer merchants the ability to pass processing costs through to the customer. There are several ways these programs can be structured, each subject to a different regulatory framework.
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