Since 1 September 2016, large businesseshave been prohibited from charging excessive payment surcharges on transactions. The ban will come into effect for small businesses on 1 September 2017. The ban is currently a 2017 enforcement priority for the ACCC, which will be looking for a juicy prosecution to show off the new legislation’s teeth. And its teeth are sharp – for corporations, penalties can be up to $1,164,780 per contravention.
The ban applies equally to all industry sectors and not merely traditional ‘retail’ sectors. The ban also applies to all payment transactions, including business-to-business transactions and not merely consumer transactions.
What conduct is prohibited?
Under the new ban, a corporation (or a person) must not, in trade or commerce, charge a payment surcharge that is excessive. The ban applies to Eftpos, MasterCard, Visa and American Express “companion cards” payments. The ban does not apply to BPAY, PayPal, Diners Club cards, UnionPay and American Express cards issued directly by American Express, cash or cheque payments.
What is a payment surcharge?
A ‘payment surcharge’ is 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 is a payment surcharge excessive?
A payment surcharge will be ‘excessive’ where it exceeds the amount set out by the RBA as reasonable and considered to reflect the actual cost of processing payments. These rates are set out in an RBA Standard. The current indicative figures for allowable payment surcharges under the RBA Standard are:
(a) 0.5% for debit transactions;
(b) 1-1.5% for credit card transactions; and
(c) 2-3% for American Express “companion card” transactions.
What can be charged?
The only cost that may be recouped by a payment surcharge is the direct cost of that particular transaction. Businesses are not permitted to include internal costs of processing payments or seek to recoup the net costs for other transactions for which a surcharge is not collected.
What are the penalties?
Breach of the ban on excessive payment surcharges may result in:
(a) Infringement notices of up to $2,160 for individuals, $10,800 for unlisted corporations and $108,000 for listed corporations, per contravention; or
(b) Civil proceedings for penalties up to $233,100 for individuals or $1,164,780 for corporations, per contravention.
A consumer or group of consumers who have been affected may also commence civil proceedings for compensation for their losses.
How we can help
Our industry specialists routinely advise businesses on competition and consumer law compliance issues.
We have already been involved in investigations launched by the ACCC into payment surcharges in the removals and warehousing sectors. We are experienced in responding to such investigations and implementing strategies to respond to regulator concerns in an effort to avoid prosecution.
Given the substantial penalties that can apply for excessive payment surcharges, we recommend that any business that charges payment surcharges seeks legal advice in order to ensure that it is compliant, while still achieving the best outcome for the business.
 A business that satisfies at least two of the following tests: consolidated gross revenue of $25 million or more, gross assets of $12.5 million or more or more than 50 employees.
Nathan Cecil, Partner
T: +61 2 8083 0429
Ian Robertson, Partner
T: +61 2 8083 0401
Melbourne Dan Pearce, Partner
T: +61 3 9321 9840
Brisbane Paul Venus, Partner
T: +61 7 3135 0613
Disclaimer The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.