Can a collection agency hired by a Texas county charge a credit card fee on court debts?

Plain-English summary

When someone owes a Texas county money on a court judgment (unpaid fines, fees, court costs, a forfeited bond, or restitution), the county can hire a private attorney or a collection agency to collect it. The Cooke County Auditor asked the AG a practical billing question: can that private collector add a fee when the defendant pays by credit card? The concern was Business and Commerce Code section 604A.0021, the state law that generally forbids tacking a surcharge onto a credit-card transaction.

The AG worked through three layers. First, it flagged the statute's own legal status. A federal district court in Rowell v. Paxton had held section 604A.0021 unconstitutional as applied to certain merchants, treating a no-surcharge rule as a regulation of commercial speech under the First Amendment, following the U.S. Supreme Court's decision in Expressions Hair Design v. Schneiderman. But the AG explained that an "as applied" ruling normally invalidates a statute only for the litigant and facts before the court, not for everyone. The Rowell court itself suggested the analysis would come out differently if a merchant tried to charge a surcharge larger than the swipe fee the credit-card companies charged, because the State may still regulate false, deceptive, or misleading commercial speech. So section 604A.0021 remained enforceable in some situations.

Second, the AG pointed to an exemption built into the statute. Section 604A.0021 does not apply to "a county ... that accepts a credit card for the payment of fees, taxes, or other charges." That means a county may impose a credit-card surcharge on someone paying money owed to the county.

Third, the AG addressed the actual question: can a private collector use the county's exemption? The exemption is written for governmental entities, so it does not, on its own, cover a private attorney or collection agency. But the Code of Criminal Procedure (article 103.0031) authorizes a county to contract with a private attorney or vendor to provide collection services for these fees. Reading the two statutes together, the AG concluded that if the county is entitled to impose the surcharge, a private attorney or collection agency acting as the county's agent could collect that surcharge on the county's behalf, because an agent acting within the scope of its agency stands in the shoes of the principal. The AG added a caveat: whether a particular county contract actually creates an agency relationship depends on the contract's specific terms, and that fact question is not one the opinion process decides.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

County auditors and commissioners courts: At the time of the opinion, the AG read the statutes to mean a county could impose a credit-card surcharge on payments of money owed to it, and that a private collector hired under article 103.0031 could collect that surcharge on the county's behalf if it was acting as the county's agent. The opinion tied that conclusion to the terms of the specific collection contract.

Private attorneys and collection agencies under county contracts: The opinion explained that the statutory exemption itself does not cover private entities; their ability to charge the surcharge depended on whether their contract made them the county's agent.

Defendants paying county court debts: The opinion described why a credit-card fee on these payments could be lawful, namely the county's exemption from the no-surcharge rule, passed through an agent collector.

Common questions

Doesn't Texas law ban credit-card surcharges?
Section 604A.0021 bars them in certain sales of goods or services, but the AG noted a federal court found it unconstitutional as applied to some merchants and, separately, that the statute exempts counties collecting fees, taxes, or other charges.

Can a county itself charge a credit-card fee on court debts?
Yes. The AG concluded section 604A.0021 does not apply to a county that accepts a credit card for payment of fees, taxes, or other charges owed to the county.

How can a private collection agency charge the fee if the exemption is only for counties?
The AG concluded that a private attorney or agency hired under Code of Criminal Procedure article 103.0031 could collect the surcharge on the county's behalf if it acts as the county's agent, since an agent stands in the shoes of its principal.

Does every county collection contract allow this?
Not automatically. The opinion said whether a contract creates an agency relationship turns on the contract's specific terms and is not resolved through the opinion process.

Background and statutory framework

Code of Criminal Procedure article 103.0031(a)(1) lets a commissioners court contract with a private attorney or a public or private vendor to provide collection services for debts and accounts receivable such as unpaid fines, fees, court costs, forfeited bonds, and restitution. Business and Commerce Code section 604A.0021(a) provides that in a sale of goods or services a seller may not impose a surcharge on a buyer who uses a credit card instead of cash or a check, with limited exceptions.

On the statute's validity, the AG cited Rowell v. Paxton, in which the federal district court for the Western District of Texas held section 604A.0021 unconstitutional as applied to certain merchants, relying on the U.S. Supreme Court's decision in Expressions Hair Design v. Schneiderman that a similar no-surcharge law regulated how sellers communicate prices and so implicated the First Amendment. The AG explained, citing Federal Election Commission v. Colorado Republican Federal Campaign Committee, that an as-applied holding ordinarily invalidates a statute only as to the litigant before the court, and noted the Rowell court's suggestion that a surcharge exceeding the merchant's swipe-fee cost could change the First Amendment analysis. (The case had an earlier history: Rowell v. Pettijohn, later vacated and remanded by the Supreme Court in light of Expressions Hair Design.)

On the exemption, section 604A.0021(b)(1) provides that the statute does not apply to a county that accepts a credit card for the payment of fees, taxes, or other charges, an exemption the AG read as limited to governmental entities. Reading that exemption together with article 103.0031, and applying the agency principle from McKaughan v. Baldwin that an agent acting within the scope of its agency may do anything the principal could, the AG concluded a private collector acting as the county's agent could collect the surcharge on the county's behalf, subject to whether the particular contract creates an agency relationship.

Citations

Statutory provisions:

• Tex. Code Crim. Proc. art. 103.0031(a)(1); art. 103.0031
• Tex. Bus. & Com. Code § 604A.0021; § 604A.0021(a); § 604A.0021(b)(1)

Cases:

• Rowell v. Paxton, 336 F. Supp. 3d 724, 732 (W.D. Tex. 2018)
• Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144, 1147 (2017)
• Fed. Elec. Comm'n v. Colo. Republican Fed. Campaign Comm., 533 U.S. 431, 437 (2001)
• Rowell v. Pettijohn, No. A-14-CA-190-LY, 2015 WL 10818660 (W.D. Tex. Feb. 4, 2015)
• Rowell v. Pettijohn, 137 S. Ct. 1431 (2017)
• McKaughan v. Baldwin, 153 S.W. 660, 661 (Tex. Civ. App.-Austin 1913, no writ)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0257
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2019/kp0257.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

June 14, 2019

Ms. Shelly Atteberry Opinion No. KP-0257
Cooke County Auditor
Cooke County Courthouse Re: Whether a private attorney or collection
101 South Dixon Street agency that contracts with a county to collect
Gainesville, Texas 76240 delinquent amounts owed to county courts may
charge defendants a fee for the use of credit
cards (RQ-0261-KP)

Dear Ms. Atteberry:

    A commissioners court of a county "may enter into a contract with a private attorney or a public or private vendor for the provision of collection services for . . . debts and accounts receivable such as unpaid fines, fees, court costs, forfeited bonds, and restitution ordered paid," among other items. TEX. CODE CRIM. PROC. art. 103.0031(a)(1). You ask whether a private attorney or a collection agency entering into such a contract may charge a fee for the use of credit cards to pay those debts.1 You raise section 604A.0021 of the Business and Commerce Code in particular and ask whether that statute prohibits charging such a fee. Request Letter at 1.

    Section 604A.0021, with limited exceptions, prohibits imposing a surcharge for the use of a credit card in certain circumstances: "In a sale of goods or services, a seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment." TEX. BUS. & COM. CODE § 604A.0021(a). Before addressing your specific question, it is first necessary to address the validity of section 604A.0021 generally.

    A federal district court addressing section 604A.0021 recently held that, as applied to certain merchants, the statute violates commercial free-speech rights under the First Amendment. See Rowell v. Paxton, 336 F. Supp. 3d 724, 732 (W.D. Tex. 2018). The district court relied on the U.S. Supreme Court decision in Expressions Hair Design v. Schneiderman to reach its decision.2 Id. In Expressions Hair Design, the Court addressed a statute similar to section 604A.0021 that prohibited a seller from imposing "a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means." 137 S. Ct. 1144, 1147 (2017). Concluding that the statute regulated "how sellers may communicate their prices," the Court held that it regulated speech and required evaluation under a First Amendment analysis. Id. at 1151. Performing that analysis with regard to the Texas statute, the district court in Rowell v. Paxton concluded that section 604A.0021 did not withstand constitutional scrutiny as applied to the facts in that case. Rowell, 336 F. Supp. 3d at 732.

    When a court determines that a statute is unconstitutional as applied, it normally invalidates the statute only as applied to the litigant in question and does not render the statute unenforceable with regard to other litigants or different factual circumstances. See Fed. Elec. Comm'n v. Colo. Republican Fed. Campaign Comm., 533 U.S. 431, 437 (2001). In holding section 604A.0021 unconstitutional as applied, the district court noted that the merchants in question did not seek "to extract additional profits by imposing surcharges in excess of the cost of accepting each credit card." Rowell, 336 F. Supp. 3d at 730. Thus, the court concluded that the speech at issue was not deceptive or misleading. Id. However, the court acknowledged that the State is "free to prevent the dissemination of commercial speech that is false, deceptive, or misleading," and suggested that the First Amendment analysis would be different if the merchants sought to impose higher surcharges than the swipe fees charged to the merchants by credit card companies. Id. Thus, circumstances may still exist where, as applied, section 604A.0021 operates to prohibit a credit card surcharge fee.

    Even where section 604A.0021 remains valid, however, it is unlikely a court would find it applicable to the specific circumstances you describe. Section 604A.0021 does not apply to a "county ... that accepts a credit card for the payment of fees, taxes, or other charges." TEX. BUS. & COM. CODE § 604A.0021(b)(1). Thus, section 604A.0021 does not prohibit a county from imposing a surcharge on a payee using a credit card for the payment of fees, taxes, or other charges owed to the county. Id. You question whether that exception would also allow a private entity contracting with the county to charge a credit card fee. Request Letter at 2. The exemption in subsection (b)(1) expressly applies only to governmental entities and would not generally exempt a private attorney or collections agency. TEX. BUS. & COM. CODE § 604A.0021(b)(1). However, section 103.0031 authorizes a county to contract with "a private attorney or a public or private vendor for the provision of collection services for ... fees." TEX. CODE CRIM. PROC. art. 103.0031(a)(1). Reading these provisions together, if a county is entitled to impose a surcharge fee for credit card use, a court would likely conclude that a private attorney or collections agency acting as an agent for the county could collect that surcharge on behalf of the county when collecting other fees, taxes, or other charges. See McKaughan v. Baldwin, 153 S.W. 660, 661 (Tex. Civ. App.-Austin 1913, no writ) (explaining that an agent, acting "within the scope of the business for which such agency is created, stands in the shoes of the principal and may do anything in reference to such business that the principal could have done").3

                                  SUMMARY

                  Section 604A.0021 of the Business and Commerce Code prohibits imposing a surcharge for the use of a credit card in certain instances. Although a recent judicial decision held section 604A.0021 unconstitutional as applied to specific facts, it remains enforceable in some contexts. But it does not apply to a county imposing a surcharge on a payee using a credit card for the payment of money owed to the county.

                  Section 103.0031 of the Code of Criminal Procedure authorizes a county to contract with a private attorney or a public or private vendor for the provision of collection services for fees. If a county is entitled to impose a surcharge fee for credit card use, a court would likely conclude that a private attorney or collections agency acting as agent for the county could collect that surcharge on behalf of the county when collecting other fees, taxes, or other charges.

                                         Very truly yours,

                                         KEN PAXTON
                                         Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

1See Letter from Ms. Shelly Atteberry, Cooke Cty. Auditor, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Dec. 18, 2018), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").
2The district court initially found the state statute constitutional; however, the U.S. Supreme Court granted certiorari, vacated the district court's judgment, and remanded the action for further proceedings in light of its decision in Expressions Hair Design v. Schneiderman. See Rowell v. Pettijohn, No. A-14-CA-190-LY, 2015 WL 10818660 (W.D. Tex. Feb. 4, 2015); Rowell v. Pettijohn, 137 S. Ct. 1431 (2017).
3Whether a county's contract with a private attorney or debt collection agency creates an agency relationship will require evaluating the specific contract at issue and is not a determination appropriate for the opinion process.