The Australian Competition and Consumer Commission (ACCC) is cracking down on businesses charging customers excessive surcharges for paying with credit and debit cards.

On 1 September 2016 new laws were introduced to prevent large businesses charging customers more than what it costs them to accept payment by credit and debit card. This law was extended on 1 September 2017 and now applies to businesses of all sizes. The aim is to improve transparency around the costs of paying by card. Ultimately customers should be confident that a surcharge represents actual costs to a business and is not just another revenue stream.

The ACCC is responsible for enforcing these laws and where they believe excessive surcharges have been imposed they can issue infringement notices or commence legal proceedings against those involved. Penalties can be significant – recently the ACCC issued four infringement notices to a large business totalling $43,200.00. This was for charging four of its customers excessive surcharges.

So what can a surcharge legally include?

The Reserve Bank of Australia (RBA) sets out what costs can be recovered under a payment method surcharge. You can include the cost of acceptance for the relevant payment type as shown on your monthly statement from your bank or payment facilitator.

You may have an additional provider you pay separately for:

1. • Fees for rental and maintenance of payment card terminals
   • Gateway fees
   • Cost of fraud prevention services
   • Fees or premiums to insure against ‘forward delivery risk’

In this case if you want to include those costs in a payment surcharge then you will need to calculate what your allowable surcharge is. The RBA sets out how to calculate your allowable surcharge at: http://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/q-and-a/card-payments-regulation-qa-conclusions-paper.html#surcharging-merchants-q7

What payment methods does this restriction apply to?

It is important to understand that this law only applies to the following payment methods:

1. • Eftpos (debit and prepaid)
   • MasterCard (credit, debit and prepaid)
   • Visa (credit, debit and prepaid)
   • American Express “companion cards” (cards issued through an Australian financial service provider instead of directly from American Express)

Payment methods specifically not covered by the legislation include: BPAY, PayPal, Diners Club Cards, UnionPay, American Express cards issued directly by American Express, cash and cheque.

How will a customer know if they are being charged an excessive surcharge?

The ACCC says that you can expect payment surcharges as follows:

• 1. 0.50% to 1.00% of transaction value if paying by debit card
  2. 1.00% to 1.50% of transaction value if paying by MasterCard or Visa credit cards
  3. 2.00% to 3.00% of transaction value if paying by American Express.

Customers who believe they have been charged an excessive surcharge can contact the ACCC.

What’s the risk?

Busineses who do not comply with the legislation risk legal action from the ACCC and from customers impacted by excessive surcharges. Along with this comes the risk of bad publicity plus the impact on cash flow of any financial penalties that may be applied.

If you currently charge customers surcharges for different payment methods take the time to ensure your charges are not excessive. A fine of $43,200.00 for just four customers being charged excessively is significant and if you have a problem to fix, it is likely to be many more than four customers affected.

If you need help understanding payment surcharges and what constitutes excessive surcharges please call us on 03 5339 3200 or contact us here.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.