With Commissioner for Consumer Protection David Hillyard

If you pay for goods or services by card, you’ll be pleased to know there’s a ban on excessive payment surcharges which applies to all businesses across Australia as of 1 September 2017.

The new law limits 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. It came into effect for large businesses last year.

The Australian Competition and Consumer Commissioner (ACCC) has new powers to enforce the ban and will investigate complaints relating to excessive payment charges. The ACCC has published a fact sheet on its website accc.gov.au.

Small businesses that choose to impose payment surcharges need to ensure their surcharge levels are compliant now the ban has started.

Businesses can only pass on to customers what it costs them to process a payment, such as bank fees and terminal costs. For example, if the cost of acceptance for Visa Credit is one per cent, a business can only pass on a surcharge of one per cent to customers paying with Visa credit cards. Internal costs cannot be included in the calculation.

If businesses want to set a single surcharge across multiple payment methods, the surcharge must be set at the level of the lowest cost method, not an average. For example, if the business cost of acceptance for Visa Credit is 1.5 per cent, and for American Express is 2.5 per cent, the single surcharge would be 1.5 per cent as that is the lowest of all payment methods.

Financial institutions were required to send businesses a merchant statement which clearly sets out the business’ costs of acceptance for each payment method. So, small businesses should have received information from their bank in July to help them calculate in advance appropriate surcharges when accepting debit and credit cards. Businesses should follow up with their bank if they did not receive those statements or if they have received the statements but are still unsure about their cost of acceptances.

The Reserve Bank of Australia (RBA) indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5 per cent, by credit card 1-1.5 per cent and for American Express cards around 2-3 per cent.

• A surcharge will be considered excessive where it exceeds the permitted cost of acceptance, as defined by the RBA.
• The RBA’s website (www.rba.gov.au)  provides detailed information about the Standard, including how businesses can identify and quantify costs that can be passed on to a consumer as a surcharge.
• Payment types not covered by the ban include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

Enforcing the ban

The ACCC can issue surcharge information notices, and these will require a business to provide evidence of their costs of processing a payment, in comparison to the surcharges they are applying, in order to determine whether or not their surcharges exceed the permitted level.

If the ACCC has reasonable grounds to believe that a business has breached the ban, they can issue an infringement notice or take court action against the business. More information about penalties for businesses that breach the new law can be found at www.accc.gov.au.

The ban does not alter existing Australian Consumer Law obligations – businesses must not make false or misleading representations about the price of goods or services, or engage in component or partial pricing, where the upfront advertised price only constitutes part of the total price of the goods or services.

Passing on the cost of processing debit and credit card payments is not mandatory for businesses and many incorporate these costs in their overheads. The ban obviously only has an effect on those that do impose a payment surcharge.

David Hillyard, Commissioner, by CP Media