Businesses in Australia are prohibited from charging excessive payment surcharges for certain payment methods including Visa and MasterCard credit and debit cards and EFTPOS.
Introduction
Businesses can only pass on to the customer what it costs them to process a payment (also known as the 'cost of acceptance'). In most cases, the permissible level a business can charge a customer for processing payments will be no greater than the amount the business has been charged by their bank.
A payment surcharge is considered excessive if it exceeds the 'cost of acceptance'.
How to Comply
Where a business decides it wishes to impose a payment surcharge, it should take the necessary steps in order to comply with the regime. Download our Payments Checklist for a step by step guide on how you remain compliant with the regime.
Included Payment Types*
The Standard sets out what payment types are covered by the ban.
- Eftpos (debit and prepaid);
- MasterCard (credit, debit and prepaid); and
- Visa (credit, debit and prepaid).
*Following the 2019–21 Review of Retail Payments Regulation, the RBA revoked the designation of the American Express companion card system, because the four major banks had ceased offering companion cards.
Other payment types might have similar conditions in their merchant agreements as the RBA's standard for surcharge limits. This means merchants could be contractually required to follow similar caps for surcharging cards from these other systems. Additionally, new payment types could be regulated and included in the future.
Excluded payment types:
- BPAY;
- PayPal;
- Diners Club cards;
- American Express cards issued directly by American Express;
- Taxi fares, whatever the payment type.
- Cash; and
- Cheques.
Businesses are able to apply payment surcharges to the payment types which are excluded from the ban. These payment surcharges are not subject to the ban, and therefore the ACCC cannot take action if they are excessive.
Cost of Acceptance
Where businesses choose to impose a payment surcharge on a payment method covered by the ban, the amount of the surcharge must not exceed the cost of acceptance for that payment method.
The costs of acceptance are calculated over a 12-month period and are typically expressed as a percentage of the total value of the card transaction. Banks and payment facilitators are required to clearly set out average service fee for each card scheme in their monthly statements provided to businesses.
Businesses can also choose to pass on additional permissible costs, such as gateway fees fraud prevention costs. Businesses will need to calculate the permitted surcharge themselves and must verify these permissible costs by contracts, statements or invoices. Businesses cannot include any of their own internal costs when calculating their surcharges (for example, labour or electricity costs).
The Cost of Acceptance = Service Fee + Permissible Costs
Charging Handling Fees or Processing Fees
The ban on excessive payment surcharges does not prevent a business from charging fees that are genuinely unrelated to its payment methods. This might include things such as handling or processing fees.
Businesses need to comply with their existing obligations under the Australian Consumer Law, such as including all components that make up the price of the good or service in the advertised price, where these components can be quantified. Businesses also need to:
- ensure they do not mislead consumers
- continue to provide adequate disclosure
- be clear about the nature of the handling or processing fees and the circumstances in which these fees apply.
A business is not able to by-pass the ban by introducing what is in effect a payment surcharge but calling it something else, (i.e.: a booking fee). Where a business imposes a fee that is payable on some payment methods but not others, regardless of how it is described, it is likely to be a payment surcharge. The ban will apply and the surcharge amount will be limited to the costs for accepting that payment method, plus any permissible costs.
Reviewing Your Surcharge Levels
Businesses are required to review the level of any payment surcharge they impose once a year.
Whilst the costs of acceptance for some payment methods may fluctuate from month to month based on the mix of cards presented, and some businesses may wish to reset the payment surcharge levels based on these monthly fluctuations, the Standard is designed so that businesses are able to analyse the payment costs once a year, using their annual statement, and set the surcharge amounts for the next year based on this information.
The ACCC's Enforcement Powers and Penalties for Breaches
The ACCC has the power to issue 'surcharge information notices' to businesses and banks, requiring them to provide evidence of the actual costs of processing a payment, in comparison to the surcharges they are applying, in order to determine whether or not their payment surcharges exceed the permitted level.
If the ACCC has reasonable grounds to believe that a business has breached the ban, it can issue an infringement notice:
- $19,800 (60 penalty units) for corporations.
- $198,000 (600 penalty units) for listed corporations.
- $3,960 (12 penalty units) for individuals.
The maximum pecuniary penalties for breaches of the ban on excessive payment surcharges are:
- $2,135,430 (6,471 penalty units) for corporations.
- $427,350 (1,295 penalty units) for individuals.*
*The value of a penalty unit is $330 effective 1 July 2024.
Background
The Competition and Consumer Amendment (Payment Surcharges) Act 2016 (the Act) commenced on 25 February 2016. The Act inserted a new part into the Competition and Consumer Act 2010 (CCA) which bans excessive payment surcharges.
On 26 May 2016, the Reserve Bank of Australia (RBA) published its Standard relating to surcharges charged by businesses when charging customers for the use of a credit or debit card. Surcharges are deemed excessive where they exceed the permitted surcharge amount in the standard or the Act.
The Australian Competition and Consumer Commission (ACCC) has investigation and enforcement powers to enforce the ban on excessive payment surcharges.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
