How to avoid being caught out by the ACCC’s ban on excessive payment surcharges

It’s here: after years of rollout, Australia’s laws banning excessive surcharges for credit card payments now apply to small businesses.

Extra fees for processing payments have been a bugbear for consumers for years, and a change to the Competition and Consumer Act last year meant the big end of town had to review its payment practices from September last year.

Small businesses had 12 months’ breathing room, but from today they must follow the rules too or face enforcement activity from the Australian Competition and Consumer Commission.

Here’s what you need to know about what fees you can pass on, and when.

You can only charge what it costs you

From September, the only surcharge you can apply to card payments by customers is one to cover the costs your financial institution places on processing that transaction.

For example, if the cost to your business of accepting a particular kind of debit, prepaid or credit card is 1.5%, you can only charge your customers a 1.5% surcharge on purchases they make using that card.

All banks and financial providers are now required to deliver a statement that outlines average card processing costs. A business can also pass on some costs for rental of payment terminals, fraud prevention and some gateway fees, but a business is required to account for and work out the acceptable percentage they can pass on themselves.

What if I accept all cards?

The surcharge requirements apply to all Eftpos, Mastercard, Visa and American Express cards issued in Australia. If a business elects to use a flat fee to cover all payment types, the fee you charge has to correspond to lowest card processing fee of all the types you accept.

“Our advice 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,” ACCC deputy chair Michael Schaper said in a statement yesterday.

For example, if you accept one card type that costs you 1% of the transaction to process, and another that costs 1.5%, you can only charge a 1% surcharge.

What are the penalties?

The consumer watchdog has been given the power to investigate complaints about excessive surcharges, as well as issue penalties of up to $126,000 for non-compliance.

If a complaint is made about a business charging too much, the ACCC can compel the business to provide evidence from their banks about what it costs to process payments. If an instance of overcharging is found, a business could face penalties of up to:

• $126,000 for a listed company;

• $12,600 for a body corporate; or

• $2,520 for an individual.

The ACCC can also take businesses to court to seek penalties of up to $1.3 million for a body corporate, or $271,000 for other parties.

How can I review or double check my fees?

The ACCC says businesses should only have to review their surcharge levels once each year from now on. If unsure about the costs of processing, businesses are advised to contact their banks for a cost of acceptance statement.