From 1 September 2016 the Australian Competition & Consumer Commission (ACCC) will commence imposing penalties on merchants who charge customers excessive surcharges for using particular payment methods when selling goods or services.

Which payment systems are subject to the new laws?

The new surcharging standards will apply exclusively to the following card systems - eftpos, Debit MasterCard, MasterCard Credit, Visa Debit, Visa Credit and American Express cards issued by Australian banks. All transactions carried out using other payment methods, such as UnionPay, JCB, Diners Club, PayPal or BPAY, will not be subject to the new surcharging restrictions.

What surcharge will a merchant be able to impose when they accept a card payment?

Merchants will retain the right to impose cost-based surcharges on card payments. However, surcharges must not exceed the merchant’s average cost of acceptance for that type of card.

To determine their average cost of acceptance, merchants will need to calculate their average percentage payment costs to accept a particular type of card based on the monthly or annual statements provided to them from their bank or payments provider. These average acceptance costs will be based on the costs actually incurred by the merchant, such as merchant service fees, terminal rental costs and any other fees incurred in processing card transactions.

Importantly, the ACCC expects that merchants who wish to apply a surcharge will typically do so in percentage terms rather than a fixed dollar amount, resulting in surcharges on lower-value transactions being reduced significantly. This accords with the Government’s commitment to addressing consumer dissatisfaction with the practice of imposing fixed-dollar surcharges that far exceed the actual cost of card acceptance by merchants.

What penalties apply?

The penalty applicable for listed corporations is $108,000 per contravention, $10,800 for other companies and $2,160 for all other merchants.

When will the enforcement of the new law commence?

The ban on excessive payment surcharges will be rolled out in two stages. Large merchants will be required to comply with the new surcharging standards from 1 September 2016 and all other merchants will be subject to the standards from 1 September 2017. Large merchants are those that satisfy at least two of the following requirements: consolidated gross revenue of $25 million or more; the value of consolidated gross assets is $12.5 million or more; 50 or more employees.