The Australian Competition and Consumer Commission (ACCC) has fined online gift retailer Red Balloon $43,200 for excessive payment surcharges. From 1 September 2016 (for large businesses) and 1 September 2017 (for all businesses), new laws have been introduced to address excessive payment surcharges.

These laws impact businesses accepting card payments from:

  • MasterCard;
  • Eftpos;
  • Visa; and
  • American Express.

The Reserve Bank of Australia (RBA) has set out the payments covered by the ban in the RBA standard. The RBA standard also determines the processing costs for a business accepting payments via these methods.  

The Facts

The ACCC alleged that Red Balloon charged four customers an excessive payment surcharge. The ACCC issued four infringement notices for the alleged breaches under these laws. This made Red Balloon Australia’s first business to be fined for excessive payment surcharges.

As a result, Red Balloon has since reduced its surcharge fees. It has also cooperated with the ACCC’s investigation into their surcharge levels.

The New Laws

The new laws ban businesses from passing on excessive surcharge fees to their customers. Businesses must only pass on what it costs them to process these payments, which is known as the “cost of acceptance”.

If a business is charged 1% by their financial institution for accepting Visa payments, they must only pass on a surcharge of 1% to their customers. Charging an amount greater than 1% is an excessive payment surcharge fee. 

Four Tips for Complying with the New Laws

The ACCC is continuously reviewing complaints of excessive payment surcharges. Therefore, these laws will apply if you pass on a surcharge for accepting MasterCard, Eftpos, Visa and American Express payments. 

There are a number of things you can do to ensure your business’ compliance with the new laws.

1. Determine Whether The Laws Apply to You

If you choose to pay the cost of acceptance yourself, or absorb the fee into your cost of goods and services, you will not be affected by these laws.

2. Know the Permitted Surcharge Fee for Each Payment Method 

Your financial institution can provide you with an annual statement to help you calculate the costs for each payment method. 

3. Ensure a Fixed Surcharge Fee is Compliant with the Laws 

You are permitted to set a fixed surcharge fee for all card payments to make it easier for you to manage your payment processes. However, this surcharge fee must not exceed the cost of acceptance of any transaction.

If your financial institution charges you 1% for Visa and 2% for MasterCard, you must set your fixed surcharge fee to the lowest amount (1%). This will ensure that you are not passing on an excessive payment surcharge fee. 

4. Review Your Surcharge Levels Annually

The cost of acceptance may fluctuate from month to month. However, the RBA standard allows you to review your surcharges annually. 

This process allows you to regularly assess compliance and reduces the risk of disputes arising.

Key Takeaways

Red Balloon’s large fine from the ACCC is a timely reminder for businesses to ensure that their surcharge fees are in order. Getting your surcharge levels right can help save you thousands of dollars in bank fees. Getting them wrong can cost you thousands of dollars in fines. 

LegalVision has developed a surcharge checker for businesses calculate their permitted cost of acceptance, because we know the importance of compliance. Our lawyers determine the amount that you are legally permitted to pass on and advise you on the best method to do so. We also help assess whether you are eligible to pass on other fees, as permitted under these laws. These include:

  • gateway fees; 
  • fees for fraud protection services; 
  • card terminal fees paid to other parties; and 
  • fees for forward delivery risk insurance. 

If you want advice on complying with these laws, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page. 

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