Australia - Credit card crack down: Is your business affected?
In February 2016, the Competition and Consumer Act 2010 (Cth) (Act) was amended to prohibit
corporations from charging 'excessive' payment surcharges to consumers. The Reserve Bank of
Australia has now issued 'Standard No.3 of 2016 Scheme Rules Relating to Merchant Pricing'
(Standard), which governs how merchants are to determine surcharges for consumers who use
credit and debit cards in transactions. Surcharges will be considered excessive (and therefore in
breach of the Act) where they exceed the permitted ‘cost of acceptance’ as defined in the Standard.
The Australian Competition and Consumer Commission (ACCC) will begin enforcing this new
surcharge regime from 1 September 2016.
What payment methods are captured?
The Standard will apply to all debit and credit cards, including EFTPOS, Debit MasterCard,
MasterCard Credit, Visa Debit, Visa Credit, and American Express. Other payment methods, such as
PayPal and BPAY, will not be affected.
When is a surcharge excessive?
Merchants can still impose surcharges on card payments, but these cannot exceed a merchant's 'cost
of acceptance' for that type of payment. To ascertain this cost, a merchant must first determine the
sum of the actual costs it incurs in accepting payment by the particular credit or debit card. Such
costs include those relating to fraud prevention, terminal renting and servicing and insurance. The
merchant must then add these costs together and express the total as a percentage of the total value
of card transactions between the merchant and its customers. This percentage is the relevant ‘cost of
Who is affected?
The Standard does not affect merchants who do not impose surcharges for the relevant payment
methods (for example, businesses that already factor such costs into their pricing models).
For those merchants that do impose surcharges, the Standard will begin applying to 'large merchants'
on 1 September 2016 and to all other merchants from 1 September 2017. A large merchant is one
that meets at least two of the following requirements:
• consolidated gross revenue of $25 million or more;
• consolidated gross assets of $12.5 million or more; or
• 50 or more employees in Australia.
What penalties apply?
The ACCC may issue infringement notices to those merchants who charge an excessive surcharge
($108,000 for listed corporations, $10,800 for non-listed corporations, and $2,160 for all other
merchants). It also has the power to commence proceedings against merchants who contravene the
prohibition, and has indicated that it will not turn a blind eye to such contraventions.
For more information, please contact Anne-Marie Allgrove, Toby Patten or Matthew Dempsey.