Opinion No. KP-0095

Re: Whether a rental property owner's use of an online payment option that is accompanied by a convenience fee involves the imposition of a credit-card surcharge in violation of state law (RQ-0084-KP)

Dear Representative Keffer:

You ask three questions about the legality of a fee or charge imposed on a tenant who uses an online payment option to pay rent and ancillary charges to a rental property owner through a third-party vendor. You question whether this fee or charge for paying online could constitute a prohibited surcharge on the use of credit or debit cards in violation of section 339.001 of the Finance Code and section 604A.002 of the Business and Commerce Code.

  1. Briefing submitted to this office indicates that the underlying matter has already been considered and made the subject of an advisory letter by the Texas Office of Consumer Credit Commissioner ("OCCC"), the entity tasked with enforcement of Finance Code section 339.001. It appears from the briefing that the controversy giving rise to your request stems from TAA's disagreement with the OCCC's interpretation that the online pricing practice at issue is not permissible.

  2. Your questions assume that the payments for rent and ancillary charges at issue are payments for goods or services, and we answer accordingly. You do not ask, and we therefore do not determine whether any specific rental payment is for goods and services.

Surcharge Definition

The Finance Code does not define the term "surcharge," but the Fifth Circuit Court of Appeals recently construed it for purposes of section 339.001 to be like the federal definition: "an additional amount above the seller's regular price." Rowell v. Pettijohn, 816 F.3d 73, 80-82 (5th Cir. 2016). The Court stated that under a plain reading, section 339.001 "forbids a merchant from imposing an extra charge for a purchase with a credit card" and is silent as to any other form of pricing.

Questions Considered

  1. Whether an owner of rental property who offers an online payment option through a third-party payment processor can be deemed under Sections 339.001 and 604A.002 to be a party imposing a "surcharge" when the processor remits no portion of any fee imposed to make online payments to the owner.

  2. Whether it matters to the application of Sections 339.001 and 604A.002 that a third-party vendor that provides arms-length payment processing services to a rental property owner or operator provides additional arms-length services to the owner or operator.

Third-Party Payment Processor

The plain language of the two provisions you ask about prohibits a "seller" or "merchant" from imposing a surcharge on a buyer paying by credit or debit card. The scenario you describe raises the question of whether it is the owner/operator of the rental property or the third-party processor that is imposing the online payment fee. A truly arms-length arrangement would not involve the property owner imposing an additional fee and would not run afoul of the statutes.

In your third question, you ask whether a service fee for online payments is permitted and not a surcharge so long as it applies to all forms of online payment (credit, debit, ACH, electronic funds transfer or other electronic payment format) and does not single out credit or debit card payments.

The law does not expressly address the imposition of an online convenience fee charged uniformly to all forms of electronic payment. However, it plainly prohibits the imposition of an extra fee for using a credit or debit card "instead of" another means of payment.

Summary

A court is likely to conclude that a fee uniformly charged to all online means of payment by an arms-length third-party vendor does not violate the surcharge prohibitions of Finance Code subsection 339.001(a) or Business and Commerce Code section 604A.002. Whether a rental property owner or operator and a third-party vendor of online payment processing services have a true arms-length relationship is a question of fact that cannot be answered in the opinion process.

Very truly yours,

KEN PAXTON
Attorney General of Texas
JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy First Assistant Attorney General
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
BECKY P. CASARES
Assistant Attorney General, Opinion Committee