Inflated surcharges

01.Introduction

The Reserve Bank of Australia (RBA) is finally having second thoughts about allowing retailers to surcharge as they see fit after a 2003 change in RBA regulations made the practice legal.

RBA reconsiders

In a statement released yesterday the RBA said “in recent years some surcharging practices, including surcharging well in excess of card acceptance costs, may have reduced the effectiveness of previous surcharging reforms”. The regulator had adopted a hands-off approach since the 2003 change and indicated it would allow market forces to regulate the practice, in effect meaning customers have the option of steering clear of surchargers.

That began to change late last year with the publication of a CHOICE investigation into surcharging. The Australian government said it would launch an inquiry into the practice – and whether surcharges are being adequately disclosed at point of sale – following the report.

CHOICE findings

Our report found that about 7% of merchants were surcharging in 2006 but that the rate had jumped to between 20% for smaller merchants and 40% for larger ones as of June last year. The report was commissioned by NSW Fair Trading and provided hard facts to back our stance that surcharging above the costs incurred by retailers for credit card transactions is underhanded and unfair.

As part of our research, about 88% of respondents to an online survey of 1435 consumers and a diary survey of 140 members told CHOICE they had paid credit card surcharges over the previous 12 months. Among the top offenders were airlines, telecom companies, holiday travel businesses, utilities, and taxis.

New regime

The RBA says “there may be a case for varying the Standards to allow schemes to place some limits on the level of surcharging”, adding it may “allow scheme rules to limit surcharges to an amount that is either reasonably related, or equal, to the merchant’s cost of card acceptance”. CHOICE believes the increasing number of consumers on the receiving end of surcharging will support that idea.