Wichita restaurant to pay more than $60,000 for overcharging customers using credit cards
A Wichita restaurant that was charging customers an illegal 4% surcharge on credit card purchases has agreed to pay $60,397.28 to settle a case filed by the Sedgwick County District Attorney’s Office.
The news brought a number of questions posted on social media about why the surcharge is illegal for retailers when governments pass credit card processing costs onto customers as “convenience fees” for everything from paying property taxes to buying hunting licenses.
While Kansas has made it legal for local and state governments to tack on such fees, it is one of only four states that still bans retailers from adding credit card surcharges.
Riverside Cafe’s parent company, Riverside Ventures Inc., and its owner, Paul Cohlmia, entered into a consent judgment and permanent injunction with the district attorney, whose Consumer Protection Division had received several customer complaints, according to a news release issued on Tuesday morning.
The office informed Cohlmia that the surcharge, which totaled an average of 50 cents for each transaction, was a violation of the Kansas Consumer Protection Act and fined the restaurant only after it continued the practice at three of its locations: 9125 W. Central, 739 W. 13th St. and 824 N. Baltimore in Derby.
Because it would be impractical to track down every customer who was overcharged, the release said, the restaurant agreed to pay $30,000 to a charity that serves Sedgwick County and to pay a $30,000 civil penalty, which will be paid into the county general fund. The restaurant will also pay $397.28 in court costs and investigative expenses and has agreed to stop adding the surcharge.
Contacted on Tuesday, the restaurant’s lawyer, Paul McCausland, said that Cohlmia made an unintentional mistake and took the word of a credit card company who told him that issuing a surcharge was okay. He also said that the cafe did post signs informing customers of the 4% surcharge.
“He didn’t do it right, and there was a technical violation of the state law that prohibits surcharges on any customer account and sales transactions,” McCausland said. “He has corrected the problem and we entered into a consent judgment.”
Court documents show that the earliest complaint about the surcharge was made by a customer in March 2018 and that three customers eventually issued complaints.
In August of 2018, the District Attorney’s Office sent the owners a letter offering them a chance to stop issuing the surcharge, court documents say. Then, in December of 2018, the Office of the State Bank Commissioner sent a letter asking for information about the restaurant’s policies on credit card and debit card purchases. The restaurant didn’t reply, the court documents said.
In February of 2019, the Office of the State Bank Commissioner sent the restaurant another letter asking it to comply with the law.
The court documents also say that one customer who was more than 60 years old and therefore considered a protected customer under the law dined at the restaurant several times starting in December 2018. In September 2019, that customer provided a copy of the Kansas statute prohibiting the surcharge to the person working the counter at the cafe and was told that the restaurant had found a loophole in the law allowing it to ignore the statute.
The statute that was violated, K.S.A. 16a-2-403, says that businesses cannot impose surcharges on people who want to pay with credit cards rather than cash or check. A surcharge is defined in the statute by “any additional amount imposed at the time of the sales or lease transaction by the merchant, seller or lessor that increases the charge to the buyer or lessee for the privilege of using a credit or debit card.”
A separate Kansas statute, K.S.A. 12-16,125, exempts cities from the above statute and allows them to add fees to credit card transactions for tax, utility and other payments that are equal to the fee the credit card charges the city. Notice of such a fee must be provided to people making payments by credit card, the statute says.
Another Kansas statute, K.S.A. 79-2973, allows the state and county treasurers to do the same.
Kansas, Colorado, Connecticut and Massachusetts are the only states that ban credit card surcharges, according to a January article from American Banker, a daily trader newspaper that covers the financial services industry.
In December, the Oklahoma attorney general’s office declared that the state’s no-surcharge law unconstitutionally restricted free speech. Six other states — California, Florida, Maine, New York, Utah and Texas — have bans that are not enforced or in effect anymore, according to the American Banker article.
This story was originally published February 25, 2020 at 12:00 PM.
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