From 1 September 2016, the ACCC will begin enforcing penalties on large merchants who charge excessive payment surcharges on credit, debit and prepaid card payments.

Are your payment systems caught?

The prohibition on excessive surcharging applies exclusively to the following card systems – eftpos, Debit MasterCard, Credit MasterCard, Visa Debit, Visa Credit and American Express cards issued by Australian banks. The imposition of surcharges for other payment methods, such as UnionPay, JCB, Diners Club, PayPal or BPAY, are not caught.

What surcharges can you impose when accepting a card payment?

Merchants can impose a cost-based surcharge on card payments, but any surcharge imposed must not exceed the average amount it costs the merchant when accepting payment from that type of card.  The cost of acceptance incurred by a merchant will be based on what they are charged by their acquirer or payment facilitator for each card payment. These costs would typically include merchant service fees, rental and maintenance fees for card terminals, cross-border transaction fees, switching fees and any other fee incurred in processing card transactions.

Large merchants who wish to surcharge card payments will be responsible for calculating their average cost of acceptance. In order to do so, merchants should review all relevant statements, accounts or contracts relating to their payment costs over the past 12 months. It is important for merchants to be vigilant when imposing surcharges based on their average cost of acceptance, as each particular payment method will typically have different costs of acceptance.

What are the consequences of breaching the law?

If the ACCC reasonably believes that a merchant has included an excessive payment surcharge on a card payment, the merchant may receive an “on the spot” fine up to $108,000 for listed corporations, $10,800 for other companies and $2,160 for all other merchants (per contravention).

If the ACCC takes the matter to court, a merchant may be ordered to pay penalties up to $1,164,780 for a body corporate and $233,100 for any other merchant.

What you need to do now

All merchants who impose surcharges when accepting card payments must ensure the surcharges do not exceed the maximum permitted surcharge allowable.

In order to monitor this over time and for different types of transactions, merchants should:

  1. maintain accurate and up to date records relating to the costs they incur when accepting card payments; and
  2. continually monitor the level of surcharges imposed, as actual costs incurred are likely to fluctuate over time.