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September 5, 2017

Australia bans excessive surcharge on credit and debit card payments

Australia has banned all business, including large and small merchants, from collecting excessive payment surcharge on credit and debit card payments.

The new rule, which is effective from 1 September, will be applicable to all businesses which are based in Australia or use an Australian bank.

The latest move follows the Australian Competition and Consumer Commission’s (ACCC’s) action taken in last September, whereby the competition regulator prohibited large businesses from collecting excessive surcharges.

Announcing the ban, the ACCC said that the ban prohibits merchants from charging excessive surcharge from customers, who use an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

Explaining the new guidelines, the watchdog further said that the businesses require fixing a single surcharge through multiple payment methods, which must be at the level of the lowest of all payment methods. It should not be an average level, the ACCC further clarified.

ACCC deputy chairperson Michael Schaper said: “The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs.

“For example, if a business’s cost of acceptance for Visa Credit is 1.5%, consumers can only be charged a surcharge of 1.5% on payments made using a Visa credit card.

“Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider.

“Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods. You can’t use an average of all payment methods or you will land yourself in trouble.”

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