US Law for the Tussle Between Different Modes of Payment

Customer choices between different modes of payment (paper currency, check, credit card, debit card, etc).–and what retailers do in relation to those choices– are important for understanding the effects of paper currency policies intended to enable deep negative interest rates when deep negative interest rates are called for. So it is worth knowing the law that applies to merchants trying to influence the mode of payment a customer uses among the modes of payment the merchant accepts. 

In part because my wife only recently retired as a massage therapist, our household received many copies of a notice from American Express, dated October 7, 2015 saying something quite interesting. I quote:

A federal court has ruled that American Express violated the law by prohibiting merchants from influencing the payment form that their customers use. As a result of that ruling, you may now favor any credit card brand that you wish, by, for example, communicating to customers which credit card brand you would prefer that they use, telling customers which credit card grands are the most or least expensive for you, or offering discounts or incentives to customers to use the credit card grand you prefer. Consistent with the federal court’s ruling, you may not, however, disparage or mischaracterize the American Express brand or impose a surcharge (as opposed to a discount) on customers who use an American Express credit card. 

To influence the credit card that a customer uses, you may employ any of the practices listed in Secton III.A of the court’s order, including:

  • Offering a discount or rebate, including an immediate discount or rebate at the point of sale;
  • Offering a free or discounted product;
  • Offering a free or discounted service;
  • Offering an incentive, encouragement, or benefit;
  • Expressing a preference for a particular brand or type of card;
  • Promoting a particular brand or type of card through posted information, through the size, prominence, or sequencing of payment choices, or through other communications to the customer; 
  • Engaging in any other practices substantially equivalent to these.

To review all of the applicable terms and conditions, please refer to the court’s order, a copy of which may be found at [this link]. …

If you choose to attempt to influence a customer’s choice of credit or charge card, you must reasonably indicate that you accept American Express Cards by posting signage, either at the point of sale (including online or on mobile services) or at the store entry, or by communicating orally that you accept the American Express Card prior to the request for authorization of the transaction. For example, you may satisfy this requirement by displaying a sticker at the point of sale or at the store entrance indicating all brands you accept that includes the American Express log. …

To the extent that your Card acceptance contract, or other agreement that governs your acceptance of American Express Cards, contains provisions that are inconsistent with the federal court’s ruling, American Express will not enforce those provisions. 

American Express is presently appealing the federal court’s ruling. If the federal court’s ruling is reversed or modified as a result of the appeal, American Express reserves all rights to cancel or revise these modifications.