When Jetstar passenger Klaus Bartosch was faced with a surcharge of $8.50 when he purchased a Jetstar ticket online, he started a petition to protest against Jetstar’s ‘deceitful, rip off’ credit card surcharge. Klaus’ protest struck a chord with consumers. Not only did his petition receive around 220,000 signatures, but the consumer anger he tapped into prompted legislators to introduce a ban on excessive surcharges. This article details how the new ban affects Australian consumers.

What is the Ban on Excessive Surcharging?

The new ban on excessive surcharging refers specifically to the fact that on 25 February 2016, the Competition and Consumer Amendment (Payment Surcharges) Act 2016 (Cth) officially became Australian law. The Act inserted provisions into the Competition and Consumer Act 2010 (Cth) that prohibited businesses from charging consumers excessively for using credit, debit and prepaid cards when making a purchase.

The ban comes into force for large businesses on 1 September 2016. All the others businesses must comply from 1 September 2017. The Act provides specific asset, income and employee benchmarks to determine whether a business is ‘large’. These thresholds are accessible on the website for the Australian Competition and Consumer Commission (ACCC).

To ensure compliance with the ban, the ACCC has new, extended powers. Businesses will face an infringement notice or have court action taken against them if they excessively charge their customers for using a credit, debit or prepaid card. To enforce the ban, the ACCC will rely on the information provided through consumer complaints to the commission. Which brings us nicely to the next logical question: what does the ban mean for consumers?

Implications for Consumers

The new ban on excessive surcharging means that consumers have greater protection when they enter the marketplace. Businesses will usually only be able to charge them an amount for using a credit, debit or prepaid card that is no greater than the amount the bank or payment facilitator imposes on the business for processing the transaction. In effect, the ban saves consumers from paying a fee for using a credit, debit or prepaid card that profits the business.

Consumers must be aware that the new ban does not mean that they will not face any surcharge for using a credit, debit or prepaid card. If a business has a policy of charging customers for using such a card, they are still able to do that. They simply cannot do it excessively. To enable consumers to know what constitutes an excessive surcharge, the Reserve Bank of Australia has provided estimates for the cost to businesses of processing debit, credit and prepaid cards.

Debit Cards

  • MasterCard and Visa Debit Transactions: 0.5% of the transaction value.

Credit Cards

  • Visa and MasterCard: 1-1.5% of the transaction value; and
  • American Express Cards: 2-3% of the transaction value.
    Be aware that these are estimates only. The cost to a business often depends on its size.

The effect of the ban is likely to be felt most by consumers purchasing an airline ticket online. It typically costs airlines 0.77% of the transaction price to enable customers to use a credit, debit or prepaid card when purchasing a ticket online. However, at present most airlines charge consumers upwards of $7.70 for doing so. Of course, not all businesses charge a surcharge when you use one of these cards. They simply include the cost in the total price of the good or service.

The other main implication for consumers of this ban is the need to stay informed and to pay attention at payment time. If you have a question about a surcharge, discuss it with the business. If you feel that a business is continuing to charge excessively after the ban applies to them, report it to the ACCC. Consumers can do this online on their website.

If a business charges you a ‘service fee’ or ‘handling fee’, ask whether it applies to all payment methods. If it only applies to debit, credit or prepaid card payments, it is likely that the ban will apply to that fee. Conversely, if it applies to all payment methods, it is probably not applicable. Consumers also need to be aware that the ban does not affect taxis. State and territory governments regulate the taxi industry in Australia. If you would like more information about the ban, visit the ACCC website.

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If you have a legal issue regarding the ban, speak with a lawyer. Contact LegalVision’s lawyers to assist you with your legal needs. Questions? Call us on 1300 544 755.

Carole Hemingway

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