Professional service firms, such as accountants, designers, consultants, and similar businesses, often face credit card processing fees of 2–4% when their clients pay invoices by credit card. Historically, California law discouraged adding those costs as a separate “credit card surcharge,” leading many firms to absorb the fees or reframe them as cash discounts. The legal landscape shifted again in 2024 with California’s new “Honest Pricing Law” (also referred to as the Hidden Fees Statute, Junk Fees Law, or Transparency Pricing Statute), raising new questions about what is now permitted.
Professional service firms face a particular challenge because they often cannot quote a final price upfront. Much of their work is billed hourly, making the total cost unknown at the outset, unlike a consumer purchasing a dining room table or an airline ticket.
The Current Legal Framework
Effective July 1, 2024, Senate Bill 478 amended the Consumers Legal Remedies Act (CLRA) to prohibit advertising or invoicing a price that does not include all mandatory charges, other than government‑imposed taxes and certain shipping costs. As the California Attorney General explains, “the price a Californian sees should be the price they pay.” [oag.ca.gov]
This law applies broadly to businesses transacting with California consumers for personal use, regardless of size and whether brick‑and‑mortar or online. No specific exceptions were carved out for professional services firms or for higher‑dollar transactions. Importantly, however, the CLRA (and therefore SB 478) generally does not apply to purely business‑to‑business (B2B) transactions. As a result, firms that provide services exclusively to business clients (and not individual consumers) may fall outside the statute’s scope, although other laws and contractual considerations may still apply.
The Attorney General has also acknowledged that in some service relationships the total price cannot be known at the outset. In those situations, SB 478 does not require disclosure of an unknown price, but it does require that whatever price is ultimately presented to the client include all mandatory fees.
In published FAQs, the Attorney General addressed credit card processing fees directly. In response to the question, “Does a business need to include credit card processing fees in the advertised price?”, the AG explains that generally, a credit card processing fee is not considered mandatory if the customer can avoid it by paying another way (e.g., cash or ACH). However, if a business accepts only credit cards, the fee becomes mandatory and must be included in the advertised price. [oag.ca.gov]
Some legal commentators correctly note that this guidance answers a price‑inclusion question, not whether adding a separate credit card fee is always permissible. As a result, many view the law as unsettled and they generally advise caution when attempting to pass processing fees through as a line item.
Why “Convenience Fees” Are Not a Workaround
Some businesses look to “convenience fees” as a way to pass along credit card costs, but that concept rarely fits professional services in California. True convenience fees are meant to compensate a business for offering an optional, alternative payment channel outside the ordinary course—such as allowing online or phone payments when in‑person payment is the norm. For most professional service firms, however, remote and electronic payment is not an optional convenience but a standard and expected part of the transaction. When a client is invoiced electronically and pays by credit card online (which is common) any added fee tied to that method functions economically as a credit card surcharge, regardless of how it is labeled. California regulators and courts tend to focus on substance over form, and SB 478’s prohibition on drip pricing makes introducing a separate fee late in the payment process risky. Simply calling a credit‑card add‑on a “convenience fee” does not meaningfully reduce legal exposure for professional services.
Best Practices for Professional Service Firms
Although some legal commentators read the Attorney General’s guidance to suggest that an avoidable credit card fee may be permissible in limited circumstances, the law remains unsettled (particularly for consumer‑facing engagements). As a result, the safest approaches are:
- Inclusive pricing: Set rates assuming payment by credit card and present a single all‑in price. This may involve modestly increasing hourly rates or flat fees to account for processing costs.
- Cash/ACH discounts: Disclose the higher, card‑inclusive price and offer a clearly stated discount for payment by check, ACH, or cash.
- Consistency: Ensure proposals, engagement letters, invoices, and checkout screens all reflect the same pricing structure.
Businesses encounter a wide range of practices in this area, and each firm must assess its own risk tolerance, client base, and whether its work is primarily consumer‑facing or B2B. The above is provided for general guidance only to help evaluate that risk and make informed decisions.
For questions or assistance, please contact Brandon Smith at Brandon@sfcounsel.com.
Written by Brandon Smith