In 2008, Puerto Rico adopted a law prohibiting merchants from charging credit card surcharges, while allowing merchants to offer cash discounts. In 2013, the legislature dropped the provision allowing cash discounts, and the Puerto Rico Department of Consumer Affairs has since issued an interpretation that cash discounts are forbidden.
A group of merchants sued, arguing that such a prohibition (1) frustrates the purposes of the federal Cash Discount Act and Dodd-Frank’s Durbin Amendment, and (2) is unconstitutionally vague.
Today, the First Circuit affirmed the district court’s rejection of both arguments. As to preemption, the court held that the Cash Discount Act was designed to regulate the conduct of credit card issuers and entities like them–not merchants, states, and territories, and thus was inapplicable. The court also held that the Durbin Amendment similarly only regulated the conduct of credit card payment networks. The court found that the plaintiffs failed to sufficiently plead a vagueness claim in the complaint, and thus it was not preserved.
