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Surcharges on card transactions – are you charging too much?

Surcharges on card transactions – are you charging too much?

The Competition and Consumer Amendment (Payment Surcharges) Act 2016 implemented a new framework that banned surcharges by large businesses for card payments that were excessive, including surcharges for the use of Eftpos, Mastercard, Visa or American Express. Whilst large businesses have been subject to this framework since 25 February 2016, from 1 September 2017 all businesses (including small to medium sized businesses) have been banned from charging surcharges that are in excess of the caps set out in the legislative reforms.

What are excessive surcharges?

Under these reforms, a business that is charging a surcharge for credit card payments must not charge more than the actual cost for the business to process the credit card payment via Eftpos, Visa, Mastercard or American Express. If the actual cost to process the credit card payment is a percentage of the purchase amount then the fee charged by businesses to customers can be represented as a percentage, for example, “all payments made with a credit card will attract a surcharge of 0.78% of the purchase amount”.

Under the reforms, businesses can choose to charge a set single surcharge for all payments made with a credit card, although, this set amount has to be the lowest cost for processing the payment that business will have to pay to the credit card processer. This set single surcharge cannot be the average fee but must be the lowest fee. For example, a coffee shop cannot set a single surcharge fee of $0.50 and charge a customer to use a credit card to pay for a coffee worth $4.00 (being a surcharge of 12.5% of the purchase amount).

What surcharges are excluded from these reforms?

These reforms apply exclusively to:

–          Eftpos;

–          Debit MasterCard;

–          Credit MasterCard;

–          Visa Debit;

–          Visa Credit; and

–          American Express cards,

issued by Australian banks.

Imposing surcharges for payments via Diners Club, PayPal or BPAY does not fall under these reforms.

What does this mean for my business?

Businesses should, if they already haven’t, put in place processes within their businesses that require maintaining up to date records relating to actual costs for accepting certain card payments as well as monitoring the actual costs incurred by the business in comparison to the amount of surcharges imposed by the business to customers.

If the Australian Competition and Consumer Commission (ACCC) reasonably believes that a business has included an excessive surcharge on a card payment (and that card payment falls within the scope of these reforms) the business may receive an on the spot fine up to $108,000 for listed corporations, $10,800 for other companies and $2,160 for all other merchants, with these fines being per contravention of the reforms.

Case example – Red Balloon

At the end of 2017 Red Balloon Pty Ltd paid penalties of $43,200 following the issue of four infringement notices from the ACCC for alleged breaches of these reforms.

Red Balloon was found to have charged four customers excessive surcharges for payments made by MasterCard credit, Visa credit, Visa debit and MasterCard debit on 31 March and 30 June 2017.

This case is a key example of how important it is that businesses of all sizes have processes in place to ensure they are not in breach of these reforms and are not charging customers excessive surcharges.

If you are unsure about these reforms and would like more information on ensuring your business is complying with the reforms, the Australian Competition and Consumer Commission has published guidance material for businesses (and consumers) about the ban on excessive surcharges and what it means in the day to day operating of a business. These guidance materials can be found on the ACCC’s website.

At Coutts Lawyers & Conveyancers, we can advise and draft appropriate commercial contracts or terms and conditions for your business that cover off the relevant legislation including in respect of credit card surcharges.

For further information please don’t hesitate to Contact Coutts today.

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

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