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Watchdog to enforce ban on excessive payment surcharge

POS, credit card, payment, shopperBusinesses across Australia will be banned from charging customers excessive surcharges for using certain types of EFTPOS, Mastercard, Visa and American Express cards to make payments, effective from tomorrow.

The Australian Competition and Consumer Commission (ACCC) has enforced a restriction on the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

The excessive surcharging ban has applied to large businesses since September last year and now extends to all businesses that are either based in Australia or use an Australian bank.

“The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs,” said ACCC Deputy chair Dr Michael Schaper. “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.”

Schaper said businesses are not allowed to add on any of its own internal costs when calculating what surcharge it will charge customers. “The only costs businesses can include are external costs charged to you by your financial provider.”

According to the consumer watchdog, if businesses want to set a single surcharge across multiple payment methods, the surcharge must be set at the level of the lowest cost method, not an average.

“For example, if a business’ cost of acceptance for Visa debit is 1 per cent, for Visa Credit is 1.5 per cent, and for American Express is 2.5 per cent, the single surcharge would be 1 per cent as that is the lowest of all payment methods,” Schaper said.

Schaper said for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods.

“You can’t use an average of all payment methods or you will land yourself in trouble,” he said.

The ACCC stated businesses should have received merchant statements from their financial institutions in July setting out their cost of acceptance for each payment method.

The RBA indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5 per cent, by credit card 1-1.5 per cent and for American Express cards around 2-3 per cent. The ACCC has found that some merchants have incurred higher costs than these but any surcharge level imposed by merchants cannot be higher than the costs incurred by them for accepting that payment method.

“If businesses are unsure about their cost of acceptance, they should contact their financial institutions,” Schaper said.

 

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