Ban on Excessive Payment Surcharges Commences

Thursday 1 September 2016 @ 10.30 a.m. | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) is reminding large businesses of a new ban on charging consumers excessive payment surcharges, which commenced today (1 September 2016), according to an article in a recent ACCC Media Release.

Background

As previously reported by TimeBase, the new law will limit the amount that a business can charge customers for use of payment methods such as:

  • EFTPOS (debit and prepaid);
  • MasterCard (credit, debit and prepaid);
  • Visa (credit, debit and prepaid); and
  • American Express cards issued by Australian banks.

Businesses can only pass on to customers what it costs them to process a payment, for example bank fees and terminal costs. A surcharge will be considered excessive where it exceeds the permitted cost of acceptance, as defined by the Reserve Bank of Australia (RBA).

The RBA has indicated, as a guide, that the costs to merchants of accepting payments by debit cards is in the order of 0.5%, by credit card is 1-1.5%, and for American Express cards it is 2-3%. Some merchants’ costs might be higher than these indicative figures.

Comment from the Consumer Watchdog

The ACCC Chairman Rod Sims was quoted as saying:

“The new law limits the amount a large business can charge customers for use of payment methods such as most credit and debit cards. Businesses can only pass on the permitted costs of the payment method such as bank fees and terminal costs. The new law has caused many large businesses to review their pricing practices. We expect to see a move from flat-fee surcharges for purchasing items like flights, towards percentage-based or capped surcharges. The ACCC is aware that some event ticketing companies are intending to change their pricing practices from 1 September such that consumers will no longer be charged fees based on the payment method chosen.”

For the first year the law only applies to large businesses, defined as having two of the following:

  • gross revenue of $25 million or more;
  • gross assets worth $12.5 million or more; or
  • with 50 or more employees.

It will apply to all businesses from 1 September 2017.

Public awareness of the ban

Consumers who believe they have been charged an excessive surcharge can contact the ACCC via their website.

It is important to note that businesses can still charge other fees, such as “booking fees” or “service fees” which apply regardless of the method of payment. In doing so, those businesses must still comply with the Australian Consumer Law (ACL) [Sch 2 to the Competition and Consumer Act 2010 (Cth)] in terms of ensuring the disclosure of any such fees is upfront and clear.

Passing on the cost of processing debit and credit card payments is not mandatory for businesses. Indeed, the ban has no effect on businesses that choose not to impose a payment surcharge.

The RBA’s website also provides detailed information for businesses about the Standard, including how businesses can identify and quantify those costs that can be passed on to a consumer as a surcharge.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

Ban on excessive surcharging by large businesses starts today – ACCC Media Release MR 156/16 

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