ACCC Announces Ban on Excessive Surcharges for Using Certain Credit Cards

Monday 4 September 2017 @ 9.57 a.m. | Corporate & Regulatory | Trade & Commerce

In a Media Release dated 31 August 2017, the Australian Consumer Commission (the ACCC) has announced that from 1 September 2017, every business across Australia will be banned from charging customers excessive surcharges for using certain types of EFTPOS, Mastercard, Visa and American Express cards to make payments.

The announcement is an extension of the "excessive surcharging ban" that has applied to large businesses since September 2016 and which, now, the ACCC says ". . . extends to all businesses that are either based in Australia or use an Australian bank". The ban according to the ACCC does not affect businesses that choose not to apply a surcharge to payments.

The Effect of the Ban

According to the ACCC the ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks. The imposition of the ban means that, businesses to whom it applies, will only be able to charge customers what it actually costs them to process payments for the affected cards, including bank fees and terminal costs.

The ACCC's Deputy Chair Dr Michael Schaper is quoted in the Media Release as saying:

“The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs. For example, if a business’s cost of acceptance for Visa Credit is 1.5 per cent, consumers can only be charged a surcharge of 1.5 per cent on payments made using a Visa credit card, . . .”


The key point of the ban is that businesses are "not allowed" to add their own internal costs to the surcharges they charge their customers:

“Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider.”

Business Wishing to Use a Single Flat Surcharge

The ACCC has not banned business from using a single flat charge but has indicated that businesses that want to set a single, flat surcharge across multiple payment methods must set the surcharge at ". . . the level of the lowest cost method, not an average". The ACCC's Deputy Chair Dr Michael Schaper is quoted in the Media Release as saying:

"Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use, is it must be the lowest of all the payment methods, . . . You can't use an average of all payment methods or you will land yourself in trouble."

Applying this, the example is given that, if a business's cost of processing for Visa debit is 1 percent, while its cost for Visa credit is 1.5 percent and for American Express is 2.5 percent, the single surcharge would need to be 1 percent, because that is the lowest of all payment methods.

Finding Out Costs of Payment Method

The ACCC's Media Release indicates that businesses should have received merchant statements from their financial institutions in July 2017 ". . . setting out their cost of acceptance for each payment method". Further, the Reserve Bank of Australia  (the RBA) has indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5 percent, by credit card 1-1.5 percent and for American Express cards around 2-3 percent. The ACCC Media Release points out that the ACCC has found that some merchants have incurred higher costs than those indicated by the RBA guide but says ". . . any surcharge level imposed by merchants cannot be higher than the costs incurred by them for accepting that payment method". If unsure about their cost of acceptance, businesses are encouraged by the ACCC to contact their financial institutions.

Certain Payment Types Not Covered

There are payment types that are not covered by the ban. These include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

Reaction to the Ban

The ABC has reported that Council of Small Business Australia (COSBOA) has indicated that the ban may lead to price rises for some goods and services. The COSBOA chief executive Mr Peter Strong is reported as  saying, ". . . some firms may choose to increase their prices to offset the impact of the ban". Mr Strong is also reported as saying, that many small businesses may not be aware the changes took effect from Friday 1 September 2017, but that the ACCC is likely to ". . . take a measured approach with its enforcement".

More Information 

The ACCC has published online guidance material for businesses and consumers and information on its new powers to enforce the ban here.

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