A 2015 study conducted by Mastercard found that Australians pay approximately $1.6 billion annually in credit card surcharges. In response to this study and a high number of consumer complaints, the Competition and Consumer Act 2010 (Cth) (“the Act”) has recently been amended to prohibit businesses from imposing excessive credit card surcharges on consumers.
The ban on excessive surcharges took effect for large merchants from 1 September 2016 and will apply to all businesses from 1 September 2017.
A large merchant is defined as a business which satisfies at least two of the following requirements:
- the business has a consolidated gross revenue of $25 million or more;
- the value of the business’s consolidated assets is $12.5 million or more; or
- the business employs 50 people or more employees.
Businesses may still impose a surcharge for using credit cards, debit cards and electronic payments, however, customers must be charged no more than the true amount of a business’s costs in accepting payment by particular methods. The Reserve Bank of Australia (“RBA”) will regularly review and set the standards for what level of surcharge is allowable under the Act.
The first standard by the RBA defined the ‘permitted surcharge’ for each type of card based on the merchant’s average cost of accepting that type of card excluding costs involved in risk of fraud or IT infrastructure. The RBA published a guidance note stating that the average cost of accepting a type of card is as follows:
- 5% for a debit card;
- 0 to 1.5% for a Visa or MasterCard; and
- 2-3% for American Express cards issued by Australian banks.
The Act does not apply to BPAY, Diners Club cards, American Express cards issued directly by American Express, PayPal, cheques and cash. American Express and Diners Club have voluntarily agreed not to charge merchants more than the RBA standards on surcharging.
The Australian Competition and Consumer Council (“ACCC”) will enforce the standards set by the RBA and impose penalties on businesses in breach of the standards. If a business is found to be charging an excessive surcharge they could be fined up to $108,000. The ACCC also has the power to act on behalf of a group of consumers who have been charged excessively and bring the matter to Court where pecuniary penalties of $1,164,780 can be enforced.
If you have been charged an excessive credit card surcharge or need assistance understanding your compliance obligations under the Act we would be happy to assist.