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Excessive credit card surcharges are illegal from today

1 September 2017

From September 1st, all Australian businesses will be banned from charging customers with excessive surcharges for using EFTPOS and credit cards to pay for purchases

Long-awaited rules banning excessive surcharges on credit card and Eftpos payments now apply across the nation in businesses large and small, closing a loophole that has been costing Australians millions of dollars.

From today it is now illegal for businesses to charge more than the amount it costs them to accept credit and debit card payments, which is about 1.5% for a Visa or Mastercard, or just 0.5% for a debit card.

So if your waiter adds a surcharge on your bill, they could be subject to hefty fines if they are unable to convince the regulator that the amount charged is not higher than their costs.

Customers can report businesses who attempt to add excessive surcharges to bills by contracting the ACCC.

Laws banning “excessive” credit card surcharges were enacted last year, fulfilling a Turnbull Government election promise, after it emerged that Australians were funding charges of $1.6 billion each year.

The Airlines, including Qantas and Virgin Australia have been among the worst offenders adding around $10 per flight, to cover the card fees..

 

What fees can be charged under the new laws?

The excessive surcharging ban has applied to large businesses since September last year, with small businesses given more time to prepare for the change which came into force today for all businesses. The Reserve Bank has indicated as a guide that the cost to merchants of accepting payment by debit cards is about 0.5%, by credit card 1-1.5% and for American Express cards around 2-3%.

The ACCC says costs may be higher for some merchants, but that any surcharge level imposed by merchants must not be higher than the costs incurred by them for accepting that payment method.

And if business owners want to charge one surcharge to all customers, they must choose the lowest processing fee among all the banks - as charging the average would risk breaking the law by overcharging a customer who banked with one of the cheaper providers.

“You can’t use an average of all payment methods or you will land yourself in trouble,” ACCC deputy chair Michael Schaper said.

“Businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs,” Dr Schaper said.

“For example, if a business’s cost of acceptance for Visa Credit is 1.5 per cent, consumers can only be charged a surcharge of 1.5 per cent on payments made using a Visa credit card.”

Under the rules businesses are not allowed to add on any of their own internal costs when calculating what surcharge they charge customers, he added.

“The only costs businesses can include are external costs charged ... by [their] financial provider.”

 

Failing to comply will incur heavy fines

The ACCC has been awarded new powers to enforce the ban, with fines of up to $126,000 for listed corporations, $12,600 for unlisted companies and $2,520 for sole traders.

If the matter goes to court, pecuniary penalties of up to $1.36 million for a corporation, or $271,950 for a sole trader or non-listed company.

Payment types that are not covered by the ban include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

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