We’ve all had the experience. You are booking your dream holiday. Or maybe just that quick trip interstate to visit family. You’ve gone through the online process and selected your relevant dates. The next step is payment. You pull out your credit or debit card and enter your details. You are duly informed that the airline will charge you what seems to you an inordinate sum in addition to the ticket price because you are using your credit card. You ask yourself: Why do they need to charge me that much for using a credit or debit card? Thankfully, Australian legislators wondered that very same thing and have recently introduced a ban on such excessive surcharging.
Excessive Surcharging
To understand what we mean by the term surcharge and excessive, it is helpful to consider the process of paying a business with a credit card. For example, if I use my credit card to process my purchase of a new pair of jeans, the business pays a fee, usually to their bank, so that the credit card payment can be processed. In turn, the business charges you, the consumer, that processing price. Some business owners choose to recoup the price of processing credit card transactions when they set the individual prices for their goods or services. Others will simply pass the processing cost on to you directly. The processing cost passed on to you is the surcharge. In short, it is the additional amount that a business charges its consumers when they pay for goods and services using one form of payment (read credit and debit card) rather than another.
An excessive surcharge occurs when a business charges a consumer for the processing fee more than it is required to pay their bank for processing the transaction. This means the business makes a profit from the fact that you are using your credit or debit card. The reason that these surcharges became a public issue was the sheer quantity of money that a business could potentially make through excessive surcharging. In May 2014, Australians made 166 million purchases worth $22.9 billion on credit cards and charge cards.
Ban on Excessive Surcharging
The Competition and Consumer Amendment (Payment Surcharges) Act 2016 (Cth) became law on 25 February 2016.
The Act effectively inserts into the Competition and Consumer Act 2010 (Cth) a ban on excessive payment surcharges. Its purpose is to prevent businesses from charging consumers a fee for using credit or debit card that exceeds the cost of processing that payment. The Australian Competition and Consumer Commission possesses new powers to enforce the ban.
The Reserve Bank of Australia determines the standard processing costs of using a credit or debit card to business. Surcharges will be measured according to those standards. The RBA also establishes which payment types fall within the ban.
The payment types included in the ban include:
- Eftpos (Debit and Prepaid);
- Mastercard (Credit, Debit, Prepaid);
- Visa (Credit, Debit, Prepaid); and
- American Express Companion Cards. These are American Express cards provided through an Australian financial service server.
The ban does not include:
- BPAY;
- Paypal;
- Diners Club Cards;
- American Express Cards issued directly from American Express;
- Cash; and
- Cheques.
This ban does not apply to credit or debit card payments for taxi services. Taxi services are not covered by the ban, or included in the RBA Standard, because the taxi industry is regulated by state and territory governments. The ban itself is being introduced in stages. Large businesses will be subject to the ban from 1 September 2016 and all other businesses from 1 September 2017.
To fall in the category of a large business, an entity (including any related bodies corporate and taking due account of the business) must satisfy two or all of the following:
- Consolidated Gross Revenue for the financial year ending 30 June 2015 is $25 million or above;
- The Value of Consolidated Gross Assets at 30 June 2015 is $12.5 million or above; and
- The business had 50 or more employees at 30 June 2015 (including full time, part time, casual and otherwise).
For their part, banks or payment facilitators must provide all businesses with statements estimating the costs of accepting each card. If you are unsure how this ban will affect you, be sure to visit the website for the ACCC for information. Alternatively, seek the advice of a qualified legal professional. Contact LegalVision’s consumer lawyers to assist you. Questions? Call us on 1300 544 755.