Small Business Update: Potential fines for Australian small businesses charging excessive payment surcharges from 1 September 2017

The Competition and Consumer Amendment (Payment Surcharges) Act 2016 will apply to all Australian businesses from 1 September 2017. The Act prohibits businesses from charging excessive payment surcharges for credit and debit card transactions. Currently the Act only applies to large businesses.

A surcharge is considered excessive if it is more than the ‘cost of acceptance’, i.e., the cost to the business of accepting that particular method of payment.

‘Cost of acceptance’ includes:

  • Merchant fees
  • Rental fees for the EFTPOS terminal
  • Other fees actually incurred, e.g. international transaction fees

For example, say you wanted to buy a coffee and a muffin that together cost $10, and you hand over your Visa credit card. The shopkeeper then tells you that there is a 50-cent surcharge for all Visa transactions. Now, given that most Visa transactions cost the retailer about 1% to 1.5% of the transaction, the most the retailer could legitimately charge for this transaction would be 15 cents.

Of course, this is a simplistic example and there are other fees that can also be included. The important thing for business owners to remember is that the surcharge must not exceed the direct cost to the business of the particular transaction. The basis of calculating the surcharge must be able to be verified by contracts, statements, or invoices.

The ban on excessive surcharges applies to all the main types of debit and credit cards, such as EFTPOS, Visa, Mastercard, and American Express companion cards (i.e., not those issued by American Express itself).

The ban does not apply to BPAY, PayPal, Diners, UnionPay, or American Express (other than companion cards).

The Australian Competition and Consumer Commission can issue infringement notices if a business is found to have charged an excessive payment surcharge. The potential fines are sizeable:

  • $108,000 for a listed corporation
  • $10,800 for a body corporate (which includes small proprietary companies)
  • $2,160 for a person other than a body corporate

Alternatively, in more serious cases, the ACCC can take court action and seek even greater penalties:

  • $1,164,780 for a body corporate
  • $233,100 for a person other than a body corporate

More information is available on the ACCC website: https://www.accc.gov.au/business/pricing-surcharging or contact Rob Lilley on robert@dclawyers.com.au

Small business owners are advised to review their payment processes and make changes if necessary.

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