The Credit Card Surcharge Heard Around the World

Posted on April 18, 2019 at 21:32 PM

Surcharge Heard Around The World



Linda Fiacco, co-owner of Expressions Hair Designs had a sign hanging in her salon that read;

All credit card payments incur a 3% surcharge.

But now she was being told her sign was illegal.

“I don’t understand,” she said to Asha, the customer who brought it to her attention. “How is it illegal?”

Linda Fiacco

Linda Fiacco

Asha wasn’t quite sure of all the details, but she recommended that Fiacco call her son, Deepak Gupta, an attorney in Washington D.C. In that call with Gupta, Fiacco learned that New York was one of the few states where credit card surcharging was still illegal.

Fiacco was devastated. Her sole motivation for the sign was to lower her costs while also providing price transparency to her loyal customers.

“We are in a service business that is very price sensitive,” Fiacco explained. “We simply can’t increase our prices when our costs go up, so we have found other creative ways to cut expenses or transfer cost.”

Fortunately for her, Gupta believed that the law was flawed. He offered to represent her rights to surcharge in a legal case against the state of New York. She accepted, and so began the modern-day David-and-Goliath story of a hair stylist and her young attorney taking on the state of New York and the biggest credit card companies in the world.

Rocky Start

Like all great underdog stories, the road wasn’t easy. They lost their initial cases in both the district and federal courts.

“It was just Deepak alone in court fighting against the Attorney General for the state of New York,” Fiacco said.  “Deepak was a genius and we thought that we won every case, but when the judge’s decision arrived, we were devastated to learn that we had lost.”

Last Resort

Despite losing in the lower courts, Fiacco and Gupta decided not to go down without one last swing, a Hail Mary, taking the case directly to the Supreme Court of the United States.

“We knew it was a slim chance that they would even agree to hear our case, but a slim chance is better than no chance,” Fiacco said.

Gupta filed a formal petition to the Supreme Court, explaining the details of the case and its long-term importance. A few weeks later, he received word that the Supreme Court had agreed to hear Expressions Hair Design v. Schneiderman.

Fiacco was elated. But she wasn’t the only one.

“Once the news got out that we were taking on the government and headed to the Supreme Court, the whole town of Vestal rallied behind us,” Fiacco said. “We became local celebrities.

Supreme Court Arguments


Deepak Gupta

On January 10, 2017 Fiacco was ushered into the Supreme Court Building and seated in the front row behind her attorney. Seated directly behind them were the who’s who of the world banking elite; the representatives of Visa, MasterCard, American Express, and Discover Card.

Their presence offered a stark contrast.

On one-side were prominent officials from one of the largest states in the union, backed by some of the most powerful companies in the world. And on the other side was a small-town hair stylist and salon owner represented pro-bono by a young, brilliant attorney.

Attorney Gupta went first, arguing that New York’s ban on surcharging was a violation of the Free Speech Clause of the First Amendment. Before he could even finish his brief introduction, Justice Elena Kagan and Justice Sonia Sotomayor interrupted him with a barrage of questions.

That led to an intense 30-minute back-and-forth between the young attorney and the judges.

Attorney Gupta was followed by opposing attorneys Eric J. Feigin, representing the Solicitor General’s office of the United States and Steven Wu, the deputy solicitor general of the state of New York.

The Justices hammered both men with pointed questions.

At one point, the court erupted in laughter when Justice Samuel Alito asked Wu if kids selling lemonade who accept credit cards would be prosecuted if they charged a surcharge.

After just one hour and three minutes, the court had heard enough to make their decision.

The Decision

In today’s age of partisan gridlock, it is very difficult to get eight people all to agree on one thing. But in a decision authored by Chief Justice John Roberts, the court unanimously ruled in favor of Fiacco, reversing the earlier decision of the 2nd District Court of Appeals. Justice Roberts wrote in his brief that the New York General Business Law’s prohibition of credit card surcharges regulates speech and therefore violates the First Amendment. The Court held that the challenged law regulated speech, and not just conduct, because the law specifically regulates the manner in which businesses may communicate their prices to consumers.

National Impact

In addition to allowing all merchants in New York to charge a surcharging fee without fear of prosecution, the case began to pave the way for legal surcharging in all 50 states. Since the ruling, district courts have overturned surcharging bans in both Texas and California, citing Expressions Hair Design v. Schneiderman as precedent.

Expressions Hair Designs Today

It has been two years since the Supreme Court case, and Fiacco is still cutting hair at her shop. She put back the credit card surcharge sign that was once illegal in New York. Her customers don’t mind at all, which proves that surcharging done with transparency and compliance does not hurt business.

“Our customers are very understanding of the surcharge fee,” Linda said. “We did not lose any clients, although many opted to pay with cash or a check. Others were fine with paying the three percent surcharge fee. Our credit card paying customers were still racking up their credit card rewards, only they were the ones actually paying for them, not us.”

Put simply, the credit card surcharge fee that made the salon famous is now no big deal.

Expressions Hair Salon NY

Expressions Hair Salon NY

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