Excessive surchages come at a cost

Following the enactment of the Competition and Consumer Amendment (Payment Surcharges) Act 2016, businesses should be aware of new restrictions in imposing payment surcharges on customers.

This amendment to the Competition and Consumer Act 2010 (Cth) (CCA) essentially bans ‘excessive’ surcharges on credit and debit card payments in transactions. This is intended to limit surcharges on payments to an amount not greater than the actual cost of using the chosen payment method, for example bank fees and terminal costs.

What constitutes an excessive surcharge has been defined in a standard set by the Reserve Bank of Australia (RBA). As a guide, the RBA has determined that accepting a Visa or Mastercard debit transaction may cost a business around 0.5% of the transaction value.  Credit cards will generally have a higher cost, estimated to be around 1 – 1.5% of the cost for a Visa or Mastercard payment. A higher transaction fee than these costs is likely to be deemed an excessive surcharge.

What does this mean for businesses?

For some businesses, the cost of processing payment is already accounted for in the price they charge consumers for their goods or services.

However, for those businesses that do vary costs depending on the payment method used by a consumer, caution is necessary.  The surcharge should not be above the actual cost incurred by the business, as advised by your payment service providers.  In enforcing this new ban, the ACCC is empowered to impose fines of up to $108,000 for listed corporations, $10,800 for a body corporate, and pecuniary penalties of up to $1,164,780 for a body corporate.

There is still time to make changes to the amount your company charges in credit surcharges.  Large businesses are required to comply with this new legislation by 1 September 2016, whilst all others have until 1 September 2017 to ensure compliance.  A large business is one that satisfies two or more of the following thresholds:

  • consolidated gross revenue for financial year ending 30 June 2015 of $25 million or more;
  • value of consolidated gross assets at 30 June 2015 of $12.5 million or more; or
  • 50 or more employees (whether full time, part time, casual or otherwise) at 30 June 2015.

Whichever category your business falls under, be sure to consider whether your surcharges may be deemed excessive.

What does this mean for consumers?

For one thing, it means that your $3.50 coffee probably won’t have an additional 50 cent surcharge when you’re all out of cash.  Nor will you face extortionate surcharges for booking a plane ticket online, though ticket prices may perhaps become higher.  The new ban means that the price you are charged should accurately reflect the real cost associated with your method of payment.

The Australian Competition and Consumer Commission (ACCC) will be inviting, and even encouraging, consumers to report complaints of businesses that continue to levy excessive surcharges.

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