The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 (Cth) has been passed by both houses of Parliament. Once enacted, it will introduce amendments to the Competition and Consumer Act 2010 (Cth) that prevent businesses from charging “excessive” payment surcharges, such as for payments by credit card. In this article, Richard Suters and Kia Daley examine the ambit of the new laws and their implications for businesses.
The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 (Cth) (the Bill) introduces a new law providing that “a corporation must not, in trade or commerce, charge a payment surcharge that is excessive”. In addition, the Bill gives power to the Australian Competition and Consumer Commission (ACCC) to issue a notice to a corporation requiring it to provide evidence about its payment surcharges and about the actual cost of processing payments.
The key objective of the ban is to protect consumers by ensuring any payment surcharges, such as those imposed on payments by credit card or other electronic methods, reflect the actual cost of accepting payment by those methods.
WHAT IS A “PAYMENT SURCHARGE”?
For the purposes of the Bill, a “payment surcharge” means either:
- an amount charged, in addition to the price of goods or services, for processing payment for the goods or services; or
- an amount (however described) charged for using one payment method rather than another.
WHEN WILL A SURCHARGE BE “EXCESSIVE”?
The Bill provides that a surcharge is “excessive” if:
- it is for a kind of payment covered by a Reserve Bank Standard, or by any regulations made for the purposes of the new law; and
- the amount of the surcharge exceeds the permitted surcharge referred to in the Reserve Bank standard or the regulations.
In other words, a surcharge must comply with the rules set by the Reserve Bank (which will be set after the commencement of the new law) and any regulations made for the purposes of the new law. In a December 2015 media release, the Reserve Bank announced its proposal to change the Bank’s surcharging standard so that merchants will be allowed to surcharge for using more expensive payment methods, but the surcharge must not be greater than the actual costs associated with accepting payment by those methods. The ambit of those costs will be defined, more narrowly than currently, as the merchant service fee and other fees paid to the merchant's bank (or other payment service provider).
CONSEQUENCES OF A FAILURE TO COMPLY
If the ACCC has reasonable grounds to believe there has been a contravention of the ban, it may issue an infringement notice. The penalty will be $108,000 for a listed corporation, or $10,800 for a body corporate other than a listed corporation. If the merchant fails to pay the penalty, it will be liable to proceedings under the Competition & Consumer Act 2010 (Cth). The ACCC may withdraw an infringement notice if it is satisfied that it is appropriate to do so (presumably by virtue of the merchant successfully demonstrating that a surcharge was not in fact excessive).
APPLICATION OF THE BAN TO “BOOKING FEES”
The Bill’s Explanatory Memorandum notes that the ban is intended to extend to charges that are associated with the use of a particular payment method even though they may be described as some other type of unrelated charge, such as a “booking”, “transaction” or “service” fee. In a similar vein, when the cost of the good or service itself is greater when paid for by one method rather than another, the ban will apply. Consumer group CHOICE has announced its approval of the new ban, praising its flexibility in being able to capture excessive surcharges disguised as something else.
The ban is not intended to apply where a merchant charges a fee that is applied consistently across all payment methods and that does not purport to be associated with the cost of payment acceptance. However, as is currently the case, these types of practices may enliven relevant protections under the Australian Consumer Law (in circumstances where such practices constitute misleading and deceptive conduct, for example).
WHAT SHOULD BUSINESSES DO?
It is expected that the new laws will come into force by 1 July 2016. In anticipation of their commencement, we recommend businesses concerned about their payment acceptance practices undertake a surcharge “health check” to ensure compliance. The most obvious first step is to ensure any credit card processing fees reflect the actual cost of taking payment by credit card.
To assist with compliance, the Reserve Bank’s proposal includes a requirement that banks provide “easy-to-understand” information to merchants about the average cost of acceptance for payment methods. This average will represent the maximum surcharge that the business may impose.
Businesses should also review any “booking fees” or similar charges and consider whether these will be caught by the new regime. The key questions to ask are whether the fee applies to some payment methods and not others, and if so, whether the fee is excessive.