As a business owner, you are probably aware that the Federal Government has recently introduced reforms to the amount that a business can charge customers for using their credit, debit or prepaid cards. To help you understand how your business will be affected, this article explains the implications of these surcharge reforms on Australian businesses.
The Ban on Excessive Surcharging
On 25 February 2016, the Competition and Consumer Amendment (Payment Surcharges) Act 2016 became part of Australian law. The Act inserts new provisions into the Competition and Consumer Act 2010 that prohibits a business from charging an ‘excessive’ payment surcharge for the use of credit, debit and prepaid cards. Extended powers to the Australian Competition and Consumer Commission (ACCC) have been given to enforce the ban.
The ban applies to ‘large’ businesses from 1 September 2016. If your business is not ‘large’, the ban applies to you from 1 September 2017.
A business (including associated bodies corporate and with due recognition of the business itself) is ‘large’ if it meets two or more of the pre-determined income, asset or employee benchmarks.
Thresholds for a Large Business
- Consolidated Gross Revenue was $25 million or above for the financial year ending 20 June 2015;
- Consolidated Gross Assets were $12.5 million or above at 30 June 2015; and
- The business had 50 or more employees at 30 June 2015. Employees can be full-time, part-time, casual or other.
Be aware that the ban does not affect the taxi industry. State and territory governments regulate taxis.
Interest in Surcharging
Surcharging by businesses became a public issue largely because of the manifestly excessive actions of a few large companies, most notably airlines. Although the Reserve Bank of Australia introduced new regulations to limit surcharges to the reasonable cost of processing credit, debit and prepaid cards (usually estimated at less than 1% of the transaction for Visa and MasterCard and 2% for American Express and Diners Club Cards) in March 2013, the excessive surcharges continued. For example, the consumer advocacy group CHOICE reported in July 2016 that Jetstar continued to impose a surcharge of approximately 10% when a customer used a credit, debit or prepaid card. For Tiger Airways, the figure is about 8.95% .
With figures such as these, it was inevitable that the Australian public, legislators and the ACCC became concerned.
How the Ban Affects Businesses
Imposing a surcharge on the use of credit, debit and prepaid cards is not used by all businesses. Some choose to incorporate the cost of these transactions into the price of their goods or services. If you are the proprietor of one of these businesses, the new ban will have zero effect on your business and your business practices.
If your business chooses to impose a surcharge when a customer uses their credit, debit or prepaid card, the new ban requires your business to limit that surcharge to the applicable cost to you of accepting that payment type. As a general guide, the surcharge your business can impose on customers is likely to be no more than the amount your acquirer (usually your bank) or payment facilitator charges the business.
To assist businesses in complying with the new ban, as of 1 June 2017 all acquirers (read banks) and payment facilitators must provide their customers with statements that clearly and simply state the average cost of acceptance for every card scheme.
Businesses can comply with their obligations under the ban before the relevant commencement date. Please note that the ban does not diminish a business’ obligation to comply with their responsibilities under the Australian Consumer Law.
In the context of the ban on excessive surcharging, the needs of businesses have not been forgotten. For example, Business Advocate Groups like the Australian Retailers Association is asking the RBA to lower the cost of card schemes by regulating the costs of high-cost payment systems including American Express and Diners Club Cards.
Non-Compliance with the Ban
If the ACCC reasonably believes that a business is not complying with the ban on excessive surcharging, it can:
- Issue an Infringement Notice; and
- Take court action seeking pecuniary penalties.
Non-compliance will be costly for any business. Also, the negative publicity that such action will attract in the media, especially online, could harm a business’ reputation and diminish their good will.
If you have any questions about how the new ban affects your business, the ACCC website is a great place to start for accessible information. Alternatively, speak with a legal professional. Their advice about your obligations now could spare your business difficulties later on. Contact LegalVision’s consumer lawyers to assist you with your legal needs. Questions? Call us on 1300 544 755.