Excessive surcharges banned for all businesses

19 Sep 2017

  • Governance

If you pass on your costs for payment processing to your customers, this ban affects you and you may need to make some adjustments.

Already in place since last year for large businesses, the ban on excessive surcharges has come into effect on 1 September 2017 for all businesses.

The ban extends to all businesses based in Australia or using an Australian bank, regardless of size or revenue, that impose any additional charges on customers for payment processing. (Taxi services are excluded as the taxi industry is already regulated by state and territory regulators.)

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the ban and will investigate complaints relating to the issue.

What are excessive surcharges?

Businesses usually incur costs for payments made via a debit, prepaid or credit card. In order to cover these costs, some businesses pass them onto to customers in the form of a surcharge.

A surcharge is considered excessive if it is higher than the actual costs incurred by a business for the particular payment type.  The ban does not prevent you from imposing a payment surcharge as a flat or fixed fee however, you will need to ensure that the amount of the surcharge does not exceed your cost of acceptance for any given transaction.

If you wish to impose a single surcharge across multiple payment types, you must set the surcharge at the level of the lowest cost - that is, no higher than the lowest permitted surcharge. For example, if the cost for processing Eftpos is 0.5% of a transaction, Mastercard is 1% of a transaction and Visa is 2% of a transaction, you cannot impose a single surcharge fee that is the average of these three costs together (i.e.1.2%), but are permitted to impose a single surcharge fee of the lowest surcharge (i.e. 0.5%)

The ban on excessive surcharges apply to the following forms of payment:
• Eftpos (debit and prepaid)
• MasterCard (credit, debit and prepaid)
• Visa (credit, debit and prepaid)
• American Express “companion cards” (American Express cards issued through an Australian financial service provider, rather than directly through American Express).

The ban does not cover payments made via: BPAY, PayPal, Diners Club cards, UnionPay, American Express cards issued directly by American Express, cash and cheques.

Typical surcharge costs for payments via EFTPOS are usually quite low, at around 0.5 per cent of the transaction value.

Payments via Visa and MasterCard incur higher costs at up to 1.5 per cent, while American Express can be between 2 and 3 per cent.

Keep in mind however that some merchants might incur lower or higher costs.

Consequences of excessive surcharges

The ACCC encourages consumers to raise any questions directly with businesses first, however they are advised to alert the commission if there are concerns.

The “ACCC can issue surcharge information notices to businesses and banks, requiring them to provide evidence of the actual costs incurred by a business for accepting a payment method,” the Commission says.

This information will then be used to determine whether a surcharge was excessive or not.

Penalties can be hefty for excessive surcharges, so as always, compliance is essential.

For more information and frequently asked questions about the excessive surcharge ban, visit the ACCC website here.

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CATEGORY Governance

TYPE Article