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Federal Senate passes new credit card surcharge laws

Posted in 'Banking' by Ben Tumilty

15 April 2016

Credit cards may no longer be subject to excessive surcharging, following new legislation passed by the Federal Senate to clamp down on the issue. But fears still remain that as opposed to saving Australian consumers, it could have the opposite effect.

The legislation passed by the Senate gives Australian Competition and Consumer Commission (ACCC) the ability to fine companies who place surcharges of up to 1000% above the real cost of processing credit card payments, according to figures confirmed by the consumer group Choice.

Tom Godfrey from the consumer group Choice, commenting on the legislation being passed, says, “We are delighted that the ACCC has finally been given the power to investigate if a surcharge is fair and issue infringement notices of up to $108,000 for companies that don’t play by the rules”.

Godfrey suggests that "Airlines, ticketing companies and taxis are among the many businesses that have for years punished consumers who pay with credit cards”, and that even when threatened with an earlier ban by the Reserve Bank of Australia (RBA), these companies ignored this and “continued to inflict pain on our hip pockets”.

Although there are no official figures to confirm which companies impose a surcharge, or how much those companies do charge for this, Mastercard commissioned research in 2014 and the results showed at this point that Australian consumers paid around $1.6bn in surcharges.

Many of these will be legitimate – many retailers will charge around 0.5% of the transaction value to cover the cost of the bank processing the credit card transaction for them. The RBA is yet to confirm the benchmark for appropriate fees, and how to adequately define “excessive” surcharges.

The Competition and Credit Amendment (Payment Surcharges) Bill 2015: The Competition and Credit Amendment (Payment Surcharges) Bill 2015:

  • First introduced on 3 December 2015. Then passed from House of Representatives to Senate on 4 February 2016.
  • Passed both houses on 22 February 2016. However, it is not due to come into force for the next few months, as it needs to receive Royal Assent.
  • Gives ACCC power to fine companies for “excessive surcharging” with fines of up to $108,000.
  • The legislation has been brought in to ensure that payment surcharges, in the legislations words, “are not excessive” and “reflect the cost of using the payment methods for which they are charged.”
  • Choice’s “Shonky Surcharge” campaign has shown that airlines such as Jetstar and Quantas are marking up their booking fee and surcharges on credit cards, with some costing up to 1188% more than the average fee incurred by merchants.
  • This is often complicated further by the fact that many of these providers only offer payment by credit card, forcing consumers to make these surcharge payments. But concern surrounds these surcharges all the same, and comes from an unlikely quarter – the creator of the original Change.org petition to ban them, Klaus Bartosch. He notes that many smaller businesses had not previously imposed credit card surcharges.

    He says, “There’s been uncertainty around whether or not surcharges are legal. And retailers have been confused about whether they’re allowed to do it”. He continues to state the fears he has that the floodgates will open for those smaller businesses to start imposing these surcharges.

    Bartosch suggests that there may be some competition between businesses to try and restrict the surcharging somewhat, but refers back to the legality of a surcharge, by saying, “if they can impose a credit card surcharge, they will”.

    Ben Tumilty

    Ben has a degree in French and has spent some time working in hotels in France. He is also keen on cricket, and runs a blog focusing on the sport, and also contributes to an online cricket website.

    Ben is a Credit Analyst at checkmyfile

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