01.Excessive surcharges continue
At the time of publication, 72 days have passed since the RBA gave credit card companies the go-ahead to put a stop to excessive surcharging. As CHOICE has been saying for the past decade, mark-ups of up to 2670% on the actual cost to merchants of processing a card transaction are both unjustifiable and unacceptable.
The new rules that took effect on 18 March allow the credit card companies to limit surcharges to an amount that's closer to the real merchant service fees, which is, on average, less than one per cent for Visa and MasterCard and about two per cent for American Express and Diners Club. These figures are in stark contrast to the 11% fee tacked on by Cabcharge, to take just one recent example. In the lead-up to the change, Visa and MasterCard told us they would consider a compliance and auditing program if surcharges continued go well beyond allowable limits.
However, it's apparent that any compliance and auditing program is not having any real effect. An analysis we undertook late last week confirmed that Qantas, Virgin, Jetstar and Tiger are still up to their old tricks, surcharging customers 4.3%, 7.9%, 4.2% and 17%, respectively, on flights to and from Brisbane for a family of four.
Recent findings revealed a booking for two adults and two children to various locations would result in the following surcharges:
- Qantas: $7.70 per person per booking, or a total of $30.80, for a domestic flight from Bundaberg to Brisbane return. Fare without surcharge $712; fare with surcharge $742.80.
- Virgin Australia: $7.70 per person per booking, or a total of $30.80, for a domestic flight from Brisbane to Mackay return. Fare without surcharge $392; fare with surcharge $422.80.
- Jetstar: $25 per person, or a total of $100, for an international flight from Brisbane to Denpasar return. Fare without surcharge $2362.80; fare with surcharge $2462.80.
- Tiger Airways: $8.50 per person per flight, or a total of $68, for a domestic flight from Brisbane to Sydney return. Fare without surcharge $399.60; fare with surcharge $467.60.
We also surveyed 1045 consumers last week, asking them to weigh in on their recent surcharging experiences. Of respondents who used their credit card in the last three months, 44% said they’d been hit with a surcharge, with those aged 18-34 reporting the highest incidence (51%) – an age group that was also least likely to know the amount of the surcharge. Disturbingly, 44% of respondents who used their credit card in the last three months also said they weren’t made aware of an alternative payment method that didn’t attract a surcharge.
Visa weighs in
We contacted Visa and MasterCard again last week for an update on their compliance and auditing programs. Visa’s country manager for Australia, Vipin Kalra, said the company is currently providing banks with a list of merchants selected for review. “The banks are required to work with the merchants and auditors to assess the merchant’s cost of card acceptance. If their surcharges are found to be excessive in relation to their costs, they will have a period of time to comply with the rules,” said Kalra, adding, “we will keep working with the banks over the next few months and monitor the effect on surcharging levels.”
Visa has also set up an email address, firstname.lastname@example.org, through which consumers can provide names and locations of retailers applying excessive surcharges to Visa transactions along with the amount of the surcharge. The company says it has received “more than 50 responses” to date. MasterCard didn't get back to us before publication.
In another promising development, the Victorian government has reportedly moved to reduce card payment surcharges on cab fares from 10% to five per cent.
Government gets involved
We applaud such moves, but in our view any oversight or compliance exercises by credit card companies will fall well short of what is needed, which is why CHOICE welcomes federal government intervention by way of the Commonwealth Consumer Affairs Advisory Council (CCAAC).
“We urgently need strong enforcement and policing of the surcharging rules, beyond what Visa and MasterCard can bring to bear through their commercial dealings, and we are glad the government has recognised this,” says CHOICE CEO Alan Kirkland.
Assistant Treasurer David Bradbury said the government has tasked the CCAAC to look at the experiences of consumers who have been stung by excessive surcharges and identify possible solutions to the problem. “Consumers are outraged at the exorbitant fees and charges some companies make them pay when buying goods and services with their credit cards,” said Bradbury. “These surcharges are, in many cases, excessively high, not transparent and often hide the true cost of the goods and services you are buying.”
Bradbury urged consumers to pass along their surcharging experiences by completing a survey, located on the CCAAC website, by 21 June 2013. “I want consumers to point out the worst surcharge offenders,” says Bradbury. “The government will await the findings of the review, but we do not rule out taking regulatory action to crack down on this fee-gouging practice.” He said the CCAAC is expected to provide a report by the end of July 2013.
Kalra agrees that credit card companies can't stop surcharging on their own. “Visa is not a regulator, but we’re doing what we can within the current framework to bring down the current high levels of surcharging. However, it is not our role nor do we have powers to achieve remedies for individual consumer complaints. Stronger consumer regulation and a better avenue for consumers to seek individual redress may be required.”
At the time of publication, our online petition against excessive surcharging had 6683 signatures - a strong message from consumers to merchants that the time to end excessive surcharging is now. The lesson of the past two-and-a-half months is also clear – the serial offenders will continue to slap on extra charges until effective monitoring and enforcement is in place.