Surcharging Not Ok in OK
March 9, 2020
Merchants Thinking About Surcharging in Oklahoma
might want to pump the brakes.
After fact checking recent industry publications, SCRATCH concludes the Oklahoma Surcharging Ban is still in full effect for merchants.
By: Lorde Astor West
Date: March 9th, 2020
Recently popular payments publications and processing companies who provide surcharging have been reporting the surcharge ban in Oklahoma has been lifted.
These reports surfaced after Mike Hunter, Attorney General for Oklahoma, published an opinion regarding the state of surcharging in Oklahoma December 17th, 2019 in response to a request from Senator Brooks to opine as to the constitutionality of the surcharging statute.
In a publication on December 20,2019 the State Senate issued a press release about the Opinion, stating that, “[t]he ‘decision’ allows businesses to apply credit card surcharges as long as they make the required consumer disclosures, giving state merchants more flexibility on how they manage their costs”.
However, according the latest Oklahoma Consumer Credit Code that reads as follows:
2018 Oklahoma Statutes
Title 14A. Consumer Credit Code
§14A-2-417. Surcharge for use of credit or debit card.
Universal Citation: 14A OK Stat § 14A-2-417 (2018)
A. No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card or debit card in lieu of payment by cash, check or similar means.
B. As used in this section, "debit card" means any instrument or device, whether known as a debit card or by any other name, issued with or without fee by an issuer for the use of the cardholder in depositing, obtaining or transferring funds from a consumer banking electronic facility.
C. For purposes of this section, a private educational institution as defined in paragraph (e) of Section 3102 of Title 70 of the Oklahoma Statutes, a private school defined as a nonpublic entity conducting an educational program for at least one grade between prekindergarten through twelve, a municipality as defined in paragraph 5 of Section 1-102 of Title 11 of the Oklahoma Statutes or a public trust with a municipality as its beneficiary may charge a service fee. The service fee shall be limited to bank processing fees and financial transaction fees, the cost of providing for secure transaction, portal fees, and fees necessary to compensate for increased bandwidth incurred as a result of providing for an online transaction.
Added by Laws 1977, c. 135, § 2, emerg. eff. June 3, 1977. Amended by Laws 2010, c. 69, § 2, eff. Nov. 1, 2010; Laws 2012, c. 221, § 2; Laws 2015, c. 319, § 3, eff. Nov. 1, 2015; Laws 2017, c. 31, § 2, eff. Nov. 1, 2017.
While it appears municipalities and private educational institution may charge a convenience fee, the ban on surcharging for merchants is still in full effect and enforceable.
Request for Clarification
To clarify our facts we reached out to the Oklahoma Department of Consumer Credit, the Office of the AG and the office of Senator Brooks. As of March 9th, SCRATCH is waiting to receive a response from the office of the Senator on the matter.
March 5, 2020
Re: Request for Clarification Regarding Oklahoma Credit Card Surcharging Ban Status
Dear Senator Brooks:
I am writing to you on behalf of Scratch Software Inc., (“Scratch”) a technology company that works to help merchants compliantly surcharge credit card transactions to recover profits lost to credit card processing fees. I write today to seek clarification on the issue of the enforceability of the ban on credit card surcharging that currently is on the books of the Oklahoma legislature (the “Ban”).
My understanding, stemming from various communications issued by your office in and after December 2019 and the press coverage surrounding such communications, is that you requested that the Oklahoma Attorney General issue an opinion regarding the constitutionality (and thus enforceability) of the Ban. Pursuant to your request, Attorney General Hunter issued an official opinion on December 17, 2019 (the “Opinion”).
Following the release of the Opinion, your office has been citing the Opinion as having invalidated the Ban. For example, on December 20, 2019 the Oklahoma State Senate issued a press release about the Opinion, stating that, “[t]he ‘decision’ allows businesses to apply credit card surcharges as long as they make the required consumer disclosures, giving state merchants more flexibility on how they manage their costs” (emphasis added). Additionally, members of the press and public have issued similar statements that imply that the Opinion had the effect of lifting the Ban.
According to our reading of the Opinion, however, these statements claiming that Oklahoma merchants may now legally levy surcharges on their customers who chose to use credit cards as a means of payment are not correct for the following reasons.
First, no language within the Opinion supports the conclusion that the Ban has been lifted. In fact, the Opinion is structured neither as a decision nor a directive. Rather, the Opinion is advisory in nature, summarizing the history of the restrictions on surcharging and describing the legal landscape under which courts in a number of states other than Oklahoma have found their respective states’ surcharging bans unconstitutional, as applied to certain specific factual situations.
Second, the Opinion does not definitively offer the conclusion that the Ban is unconstitutional. To the contrary, the Opinion clearly states that it is “the official opinion of the Attorney General that [the Ban] does not facially violate the First Amendment to the U.S. Constitution.”
Third, although there is language in the Opinion that seems to indicate that Attorney General Hunter may feel as though an Oklahoma court may determine the Ban is unconstitutional if a case is brought before such a court, this language is speculative in nature and contains caveats. The Opinion’s conclusion contains two rather large ‘if’s, as follows.
The Opinion concludes that if an Oklahoma Court were to examine the Ban under facts similar to those of record in the California and Texas cases in which those states’ surcharging bans were held unconstitutional, and if such Oklahoma court were to apply to such a controversy the “plain meaning” of the word ‘surcharge’ as opposed to the legal meaning of the word that pervades the legislative landscape, then the Ban would be found to be unconstitutional in that context.
Importantly, however, this statement carries with it a footnote that contains a significant qualification. This footnote cites Oklahoma case law to caution that, “[a]n attorney general opinion that concludes an ‘act of the legislature is unconstitutional should be considered advisory only, and thus not binding until finally so determined by an action in the District Court of [Oklahoma]’.” (emphasis added)
In light of the foregoing, it seems that the Attorney General of Oklahoma can neither invalidate the statute giving effect to the Ban, nor elect not to enforce it. Thus, it seems that the Ban is still a valid law in the State of Oklahoma, and that a merchant who charges a consumer a credit card surcharge would be in violation thereof.
As a leading service provider in the digital payments industry, my company has a responsibility to ensure that merchants have the ability to make use of every option open to them to recover profits lost to credit card processing fees. If the surcharging opportunity is in fact open to merchants operating businesses in Oklahoma, Scratch is poised to assist in that effort.
On the other hand, we also have a responsibility to ensure that merchants and consumers are treated fairly and equitably, and that merchants operate in compliance with all relevant rules and regulations. Thus, if the Ban still stands, public education as to this fact is needed.
Since my company has questions regarding the position taken by your office, and since you are the catalyst for this issue in the State of Oklahoma, I respectfully request, on behalf of Scratch, clarification from your office as to the state of the Ban. We would be appreciative if you could provide some guidance as to whether there has been some legislative, judicial, or other movement towards invalidating the Ban which is not reflected in the Opinion or the currently available coverage thereof.
Thank you for your kindness in devoting your time and attention to this matter.
Scratch Software, Inc.
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