The Competition and Consumer Amendment (Payment Surcharges) Act 2016 commenced on 25 February 2016. The Act inserts a new part into the Competition and Consumer Act 2010 (CCA) which bans excessive payment surcharges.
The Standard applied to ‘large merchants’ from 1 September 2016, However, from 1 September 2017, this applies to all other merchants.
Surcharges will be deemed excessive where they exceed the permitted surcharge amount in the standard or regulations.
In short, the new provisions limit the amount businesses can surcharge customers for use of payments methods such as credit and debit cards. The limit will be linked to the direct costs of the payment method such as bank fees and terminal costs.
Payment surcharges
When you pay a business using certain payment types, for example a credit card, the business incurs costs for processing the payment. These costs are usually paid by the business to its bank. Some businesses include these costs in the price they charge for their goods or services. Others pass the costs on as a payment surcharge.
A payment surcharge is an additional amount charged by a business when you pay for goods or services by one form of payment (e.g. a credit card) rather than another (e.g. cash).
Ban against excessive surcharges
The purpose of the ban is to stop businesses from charging payment surcharges that are excessive. That is, from charging a customer more than what it costs the business to process the payment.
A business is not required to impose a payment surcharge, but if it chooses to then it is only allowed to pass on to the customer the costs that the business was charged for accepting payment of that payment type.
The ban now applies to all businesses, regardless of their size.
Included and excluded payment types
The Reserve Bank of Australia standard sets out what payment types are covered by the ban.
Covered payment types are:
- Eftpos (debit and prepaid)
- MasterCard (credit, debit and prepaid)
- Visa (credit, debit and prepaid)
- American Express “companion cards” (American Express cards issued through an Australian financial service provider, rather than directly through American Express).
Those payment types that are not covered by the ban include: BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.
Merchants are still allowed to apply surcharges to payments using BPAY, PayPal, Diners Club and American Express cards if they wish. While these payment surcharges are not subject to the ban, and therefore the ACCC cannot take action if they are excessive, these payment systems may have rules or terms and conditions that seek to limit the surcharges merchants can impose. If you have concerns about a surcharge for paying using one of these systems you should contact that system directly.
The ban does not apply to any payments made for taxi services. Taxi services were excluded from the RBA standard because the industry is already regulated by state and territory regulators.
The ban does not affect the existing requirements for businesses to comply with the Australian Consumer Law provisions relating to false or misleading representations about price, and component pricing. These require businesses to state the total price when presenting prices to consumers and to not make false or misleading claims about their prices.
Typical surcharge costs
The RBA standard allows businesses to charge their customers a cost-based surcharge on card payments, but any surcharge will be limited to the amount it costs the business to accept that type of card for that transaction. Businesses incur costs when they accept a payment from a customer using a credit card, a debit card or a prepaid card. The level of those costs can vary according to the size of the business and which payment method is used.
The RBA has said that as a guide, payments through the domestic eftpos system (used to process payments from debit cards) are usually quite low. Accepting a Visa or MasterCard debit transaction may cost a business around 0.5 per cent of the transaction value.
Credit cards usually have a higher cost for businesses, and may cost the business up to 1-1.5 per cent for Visa and MasterCard, and between 2-3 per cent for an American Express card payment.
It is important to note that different businesses have different costs of acceptance. Some merchants’ costs may be higher than these indicative figures.
If businesses introduce other fees
The ban does not prevent a business from setting its own prices for the goods or services it sells.
A business will usually determine its prices at a level where it covers all its costs, and includes a profit margin.
If a business includes in its prices what it calls a ‘service fee’ or a ‘handling fee’ the ban will apply if those ‘fees’ are payable on some payment methods but not others (e.g. the fees apply when a customer pays with a credit or debit card, but not when the payment method is cash). A business is not able to by-pass the new ban by introducing what is in effect a payment surcharge but calling it something else.
If the fees are not described as a payment surcharge, or something similar, and are payable by the customer regardless of the payment method, then they are unlikely to be a payment surcharge and the ban is unlikely to apply. However, ‘fees’ of any sort which are payable regardless of the payment method need to be included in the advertised total price, so the consumer is aware upfront what the total cost will be. If these fees are added to the advertised price later on, the business may not be complying with its existing obligations under the Australian Consumer Law.
Enforcing the ban
The ACCC is responsible for enforcing the ban and to ensure businesses take steps to comply with the law.
They will investigate complaints relating to excessive payment surcharges and businesses will be required to provide information and documents about their costs of accepting card payments.
If they believe that a business has charged a payment surcharge which is excessive, they can issue an infringement notice to the business, which can result in the payment of a penalty or court action against the business, seeking pecuniary penalties.
What you should do – as a supplier
Review your pricing polices immediately, and if you surcharge your clients for the use of different payment methods, ensure they do not exceed what is now permissible.
What you should do – as a consumer
If you are not happy with a payment surcharge discuss the matter with the business. Remember, businesses are allowed to charge a payment surcharge, as long as it does not exceed their costs of accepting that payment type.
If a business charges a payment surcharge, you may be able to avoid it by paying in a different way. Different payment types have different costs of acceptance, so some payment types may attract a smaller surcharge, or no surcharge at all.
Quantum Partners policy
We accept payment by cheque, EFT, Visa, Mastercard and American Express and have no surcharge whatsoever.
