Could Unfair Credit Card Surcharges Disappear?

The Federal Government has responded to the Financial System Inquiry, accepting all but one of the 44 recommendations made.

In December 2013 the federal government commissioned a wide-ranging Financial System Inquiry to examine how the financial system could be positioned to best meet Australia’s evolving needs.

In December 2014 the Final Report was released. The federal government has finally responded to the report, accepting all but one of the 44 recommendations made.

The government has also gone further, including six additional measures that will help to deliver a financial system that is efficient, resilient and fair.

Credit card surcharges

At the time the government announced that it would legislate to ban merchants from imposing unfair card surcharges that are greater than the cost to them of accepting payment by card. The Government announced that it would work with stakeholders on the legislative response and phasing of the implementation.

The government also announced that it would make the Australian Competition and Consumer Commission responsible for enforcing these surcharging regulations, to ensure consumers are treated fairly and not over-charged when they pay using a card. It also endorsed the Payments System Board’s ongoing review of interchange fees.

To quote:

Inquiry Recommendation 17 — Interchange fees and customer surcharging

Improve interchange fee regulation by clarifying thresholds for when they apply, broadening the range of fees and payments they apply to, and lowering interchange fees.

Improve surcharging regulation by expanding its application and ensuring customers using lower-cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging.

The Government agrees to take action to improve interchange fee and surcharging arrangements to achieve a more efficient system and fairer outcomes for consumers, merchants and system providers.

We will phase in a legislated ban on surcharges that exceed the reasonable costs faced by merchants in accepting cards. We will also make the ACCC responsible for enforcing the ban on excessive surcharging.

We look forward to the Payments System Board completing its work on interchange fees and customer surcharging through its Review of Card Payments Regulation.

We will continue to monitor developments in the payments system, in particular surcharging arrangements, and assess whether further action is required.”

Responding to the 2015 announcements, CPA Australia chief executive Alex Malley said the Government achieved the right balance in its response to the Financial System Inquiry report.

“Consumers will warmly welcome the crackdown on excessive credit card fees,” he said.

Council on the Ageing chief executive Ian Yates also said that legislation to ban merchants from imposing unfair credit card surcharges of up to 10 per cent was good news for consumers.

The legislation has been passed

On the 22nd February 2016, the government’s legislation – The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 – passed the Senate and will officially take effect in mid-2016.

The laws equip the Australian Competition and Consumer Commission (ACCC) with new powers to enforce the ban on excessive surcharging, including the ability to gather information from those involved in the payments process and the authority to issue infringement notices against those engaging in excessive surcharging.

If the ACCC forms the view that a merchant has engaged in excessive surcharging, they may issue an infringement notice including a penalty for listed corporations of up to 600 penalty units, currently $108,000, for each alleged contravention.

The ban on surcharging will work in tandem with Reserve Bank of Australia Payments System Board standards that will set the permitted surcharge for payments.  Stakeholders will have an opportunity to participate in this process by responding to the Consultation Paper on the Review of Card Payments Regulation.

What if I have been charged an excessive surcharge?

Consumers are being urged to “Dob in the Wrongdoer” to the ACCC, keeping in mind that the ban has already commenced for large retailers but doesn’t start until September 2017 for all other merchants. (Large retailers are defined as either having gross revenue of more than $25 million, the value of its assets is more than $12.5 million, or it employs more than 50 people.) Consumers can dob in a wrongdoer online:

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