New ban on excessive credit card surcharges

On 22 February 2016 the Commonwealth Parliament passed the Competition and Consumer Amendment (Payment Surcharges) Bill 2016 (“Bill”).


The purpose of the Bill is to amend the Competition and Consumer Act 2010 to ensure that payment surcharges are not excessive and reflect the actual cost of using the payment methods for which they are charged. The Bill also provides the Australian Competition and Consumer Commission (“ACCC”) with additional powers to gather information and issue infringement notices in respect of excessive payment surcharges.


The Financial System Inquiry (“Inquiry”) invited submissions from the public in relation to Australia’s financial system, and released its Final Report on 7 December 2014. There were over 5000 submissions to the Inquiry on credit card surcharges. Significant concerns were expressed that certain payment surcharges were far in excess of what could be fairly considered to be the cost to merchants of accepting credit cards. Many of the submissions called for payment surcharges to be banned altogether. However, some submissions noted the important role payment surcharges play in reflecting the costs faced by merchants in accepting certain payment methods.


Under the Bill a payment surcharge is excessive if it exceeds the permitted surcharge referred to in the Reserve Bank standard or the regulations. At the present time no permitted surcharge levels have been set. The Bill will therefore have substantive effect only upon the making of a new Reserve Bank standard or regulations that set out the permitted surcharges for certain payment methods.


Consumer advocacy group Choice has called upon corporations to act in good faith and drop excessive payment surcharges in the interim. A Choice investigation undertaken in January 2014 found that airlines were among the worst offenders, with payment surcharges far in excess of the estimated cost of processing the payment. Payment surcharges were as high as 2,312% of the cost to the airline of processing the payment.


The ACCC may, via a surcharge information notice, require a corporation to provide evidence of the cost of processing a payment in relation to which a payment surcharge was paid. If a corporation does not comply with the notice it has committed an offence worth 30 penalty units (currently $5,400). Failure to comply with a surcharge information notice is a strict liability offence, which means that the intention of the corporation does not need to be proved.


The ACCC may also issue infringement notices where it has reasonable grounds to believe that a corporation is imposing excessive payment surcharges. The penalty is 600 penalty units, currently $108,000, in respect of a listed corporation.


In summary, the Bill does not ban payment surcharges altogether, but allows the Reserve Bank or the legislature to develop a permitted surcharge level. The permitted surcharge level has not yet been set and it is not clear when this will occur. Hopefully the passing of the Bill will provide an impetus for corporations to ensure payment surcharges are in line with the real cost to the corporation of processing payments.


The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.

Posted in LCOR