Credit and debit card surcharge ban

By Andy Young

The ACCC and Reserve Bank of Australia (RBA) excessive credit and debit card surcharge ban has come into effect for large businesses.

The crackdown is aimed at reining in some of the $1.6bn Australians are paying on surcharges every year. For the first 12 months the ban only applies to large businesses, but from 1 September 2017 it will apply to all businesses. Larges businesses are defined as having two of the following: gross revenue of $25m or more; gross assets worth $12.5m or more; or with 50 or more employees.

ACCC Chairman Rod Sims said: “The new law limits the amount a large business can charge customers for use of payment methods such as most credit and debit cards. Businesses can only pass on the permitted costs of the payment method such as bank fees and terminal costs.

“The new law has caused many large businesses to review their pricing practices. We expect to see a move from flat-fee surcharges for purchasing items like flights, towards percentage-based or capped surcharges. The ACCC is aware that some event ticketing companies are intending to change their pricing practices from 1 September such that consumers will no longer be charged fees based on the payment method chosen.”

The RBA has indicated, as a guide, that the costs to merchants of accepting payments by debit cards is in the order of 0.5 per cent, by credit card is 1-1.5 per cent, and for American Express cards it is two to three per cent. Some merchants’ costs might be higher than these indicative figures.

Sims added: “We will be enforcing these new rules from today, and the ACCC encourages all large businesses that haven’t already to ensure their payment charging methods are in line with the new law.”

It is important to note that businesses can still charge other fees, such as ‘booking fees’ or ‘service fees’ which apply regardless of the method of payment.  In doing so, those businesses must still comply with the Australian Consumer Law in terms of ensuring the disclosure of any such fees is upfront and clear.

The new law limits the amount that a business can charge customers for using credit and debit card payment methods. Businesses can only pass on to customers what it costs them to process a payment, for example bank fees and terminal costs.

The RBA website provides detailed information for businesses about the new law, including how businesses can identify and quantify those costs that can be passed on to a consumer as a surcharge.

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.