And Then There Were Two: Colorado’s Passage of Surcharge Law Leaves Massachusetts and Connecticut As Only States With Surcharge Bans

With Colorado Governor Jared Polis signing Senate Bill 21-091, repealing the state’s ban on credit card surcharging, Colorado has a surcharging law that not only ensures proper disclosure about surcharges to consumers, but mirrors the surcharging rules implemented by Visa Inc. and Mastercard Inc.

The new law, signed by Polis on Thursday, caps surcharges at either 2% of the transaction amount or the merchant’s actual cost of the transactions, mandates disclosure of the surcharge amount to consumers prior to the transaction, and prohibits surcharges on debit cards.

The bill aligns with U.S. Supreme Court precedent and legal decisions in other states ruling that surcharge bans unconstitutionally restrict merchants’ First Amendment rights.

“Colorado legislators looked at surcharging laws throughout the country and decided they did not want a Wild West environment if the state’s surcharge prohibition was dropped,” says Michael Tomko, chief operating officer for CardX LLC, which lobbied and testified in support of the bill. “The card brands created a robust engine for surcharging to ensure that there is appropriate disclosure for surcharging, such as itemizing the surcharge on the receipt, and Colorado decided it wanted to take those best practices, and the best practices from other surcharge laws around the country, and create a law that harmonizes with the rules for surcharging nationally.” 

The signing of the bill in to law, which Colorado state’s legislature passed in June, closely follows defeat of a surcharging ban in Kansas earlier this year. Chicago-based CardX, which is a surcharging-services provider, filed suit against that ban.

Colorado’s passage of the law leaves just two states—Massachusetts and Connecticut—with surcharging bans. Lawmakers in both states are surveying the surcharging landscape nationally, Tomko says. 

“We’ve been talking to lawmakers in both states,” Tomko adds. “There are several ways to work with lawmakers when it comes to surcharging. The passage of the surcharging law in Colorado paints a more coherent picture in terms of surcharging and we expect it to become an influential template for other states [considering enacting surcharge laws].”