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Judge blocks NYS credit card surcharge law

A federal judge has ruled that a New York State law that bans merchants from imposing surcharges on customers who pay by credit card is unconstitutional.

Manhattan federal Judge Jed Rakoff ruled Thursday that the law violates merchants' freedom of speech. He said it prohibits them from telling customers about the extra fees they incur for accepting credit cards.

Five merchants had filed a lawsuit against New York Attorney General Eric T. Schneiderman in June challenging the law. The measure allows retailers to offer a discount for cash, but prevents them from charging customers an extra fee to pay with a credit card.

Rakoff granted the retailers' request for a preliminary injunction. But he denied defendants' motion to dismiss the case.

Schneiderman, asked about the ruling at a business journalism conference in Manhattan Friday, said it was an ongoing issue and that he couldn't comment on it.

While merchants, who pay so-called swipe fees on each credit card transaction, have pushed for a way to pass those fees on to shoppers, it's unclear how many would take advantage of a change in the law.

Some small businesses would worry that a fee for buying with credit would turn shoppers off, said Julie Marchesella, president of the Nassau Council of Chambers of Commerce. "At the risk of losing a sale, the retailer may be reluctant to charge a fee," she said, but with swipe fees that can run from 2 percent to 6 percent of each credit card purchase, defraying that cost would be welcome.

"Small businesses have been hit with so many fees, taxes, costs and the lack of revenue from [superstorm] Sandy, they might consider it," she said.

-- AP, With Keiko Morris

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