What is the Ban on Excessive Surcharging?

Summary

• Australian law prohibits businesses from charging customers a payment surcharge that exceeds the actual cost of processing that transaction.
• The ban applies to all businesses regardless of size and covers major card types including Visa, Mastercard, and Eftpos.
• The ACCC enforces the ban and can issue infringement notices or pursue court-imposed penalties against non-compliant businesses.
• This article is a plain-English guide to the ban on excessive surcharging in Australia, aimed at business owners operating under Australian consumer law.
• It has been produced by LegalVision, a commercial law firm that specialises in advising clients on consumer law and regulatory compliance.

Tips for Businesses

Check your payment processor statements to confirm the exact cost of accepting each card type. Ensure any surcharge you apply does not exceed that cost. Keep records of your processing fees. If the ACCC investigates, accurate documentation will support your compliance position.

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On this page

• Excessive Surcharging
• Ban On Excessive Surcharging
• Implications Of the Ban On Consumers
• Key Takeaways
• Frequently Asked Questions

We have all had the experience. You are booking your dream holiday, or maybe just that quick trip interstate to visit family. You have gone through the online process, selected your relevant dates and pull out your credit or debit card. The airline you are booking with duly informs you they will charge what seems to you an excessive 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 introduced a ban on excessive surcharging.

The Australian Competition and Consumer Commission (ACCC) introduced the ban on excessive surcharging in September 2016 to ‘large merchants’. This ban was extended to all merchants from September 2017. The ban limits how businesses can surcharge customers for using payment methods such as credit and debit cards. The limit is linked to the payment method’s direct costs, such as bank fees and terminal costs. The ban works in conjunction with the Reserve Bank of Australia (RBA) Standard. This article will explain the ban on excessive surcharging, how it applies to your business, and how your business can stay compliant with its legal obligations.

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Excessive Surcharging

To understand the terms ‘surcharge’ and ‘excessive’, it is helpful to consider the process of paying a business with a credit card. For example, if you use your credit card to process your 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 fee. Some business owners choose to regain the fee of processing credit card transactions when they set individual prices for their goods or services. Others will 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 (credit or 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, meaning the business makes a profit from the fact that you are using your credit or debit card. 

Ban On Excessive Surcharging

The ban on excessive surcharging became law in February 2016. Its purpose is to prevent businesses from charging consumers a fee for using a credit or debit card that exceeds the cost of processing that payment. The ACCC possess new powers to enforce the ban.

The RBA determined the standard processing costs of using a credit or debit card to businesses. They then measured the surcharges according to those standards. The RBA also established which payment types fall within the ban.

The payment types covered in the ban include:

• Eftpos (Debit and Prepaid);
• Mastercard (Credit, Debit, Prepaid);
• Visa (Credit, Debit, Prepaid); and
• American Express Companion Cards, which are American Express cards provided through an Australian financial service server.

Payment types that the ban excludes are:

• BPAY;
• Paypal;
• Diners Club Cards;
• American Express Cards issued directly from American Express;
• Cash; and
• Cheques.

Implications Of the Ban On Consumers

As a consumer, the ban’s introduction ensures that you will not be paying excessive fees on top of your already expensive plane ticket. You can enter the market with peace of mind that businesses will not profit because you have paid using a debit or credit card. However, you may still be paying a small surcharge for using one of the payments types (e.g. Eftpos, Mastercard or Visa). If a business has a policy to charge consumers a surcharge, this will still stand, but the business cannot charge an excessive fee.  

The ACCC is responsible for enforcing the ban. If you continue to experience excessive surcharges or have seen a business charging excessive rates, you can lodge a complaint for the ACCC to investigate.

Key Takeaways

As a business owner, you must be aware of your obligations. The last thing you want to deal with is bad publicity because you are unaware of how much to charge your consumers for using their credit or debit card. Below are some helpful tips to remember:

• the ban applies to businesses of all sizes;
• if the ACCC finds your business liable for excessive surcharging, they can issue an infringement notice;
• as a business owner, you must continue to advertise your goods and services’ accurate cost to not mislead consumers; and
• banks or payment facilitators must provide all businesses with statements estimating the costs of accepting each card.

LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced consumer lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.

Frequently Asked Questions