Does your business charge credit card or other payment surcharges? Here's what you need to know to stay on the right side of the law, so you can void hefty penalties in the future.
Due to recent changes to the Competition and Consumer Act 2010 (Cth) (the Act), businesses are now banned from charging “a payment surcharge that is excessive”. A new Part IVC dealing with payment surcharges has been inserted into to the Act, and applies from 25 February 2016 onwards.
The amendments are designed to ensure that businesses do not charge more than what it actually costs them to provide a particular payment method.
What is a ‘payment surcharge’?
Under section 55A of the Act, a ‘payment surcharge’ means:
- 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.
It should be noted, in particular, that it does not matter how the payment is described. As such, ‘booking’, ‘service’ or ‘transaction’ fees will be captured by the Act if, in effect, the fee is charged for using one payment method over another (for example, paying by credit card instead of cash).
When is a charge ‘excessive’?
Under section 55B of the Act, a payment surcharge is considered to be ‘excessive’ if the amount of the surcharge exceeds the permitted amount set by a Reserve Bank of Australia standard or the regulations.
The Reserve Bank of Australia is in the process of drafting those standards, which is expected to be finalised in mid-2016. As such, what is considered ‘excessive’ will not be known, and the ban will not come into substantive effect, until those standards are published.
Enforcement of ban
The Act grants the Australian Competition and Consumer Commission (ACCC) various powers to enforce the ban on excessive payment surcharges. In particular, the ACCC can:
- require a business to provide information regarding its actual costs to process a payment which incurs a surcharge; and
- issue infringement notices for payment of a penalty to enforce the ban.
The penalties range from 12 penalty units (currently $2,160) to 600 penalty units (currently $108,000) depending on the business entity type.
What effect will the changes have on your business?
Businesses that impose surcharges to credit card payments but not other payment methods (such as EFTPOS) will need to ensure that those fees are not excessive.
In particular, businesses should review their payment surcharge fees once the Reserve Bank of Australia sets the standards on the amount that can be charged.
If you need legal advice regarding your business, please contact us and one of our experienced lawyers will be in touch with you.