ACCC gets the green light to enforce surcharge ban


Merchants now officially limited to the cost of card acceptance.

Surcharging ban takes effect


In a world where big surcharges will no longer be stealthily tacked on at the end of the booking process, consumers – especially air travellers – can expect to see significant savings.

According to the latest CHOICE analysis, for instance, prices on flights to the upcoming footy finals are set to fall around 70%.

Before the ban was announced, a surcharge on a Qantas flight from Melbourne to Adelaide to see the Crows play North Melbourne would have seen you pay $219 with a fixed $7 surcharge or 5% of the total fare.

With the introduction of the ban, the surcharge plummets to 1.3% of the fare, or $2.84. It adds up to a -59% difference between the old and new surcharges.

It’s a similar story for NRL fans travelling to see the Cronulla Sharks play the Storm in Melbourne. With a Qantas flight to Melbourne from Sydney setting you back $163, the old fixed surcharge of $7 per ticket now falls to $2.11. 

Airlines have arguably been the most aggressive serial excessive surchargers, but hotels and taxis have long played similar tricks. It remains to be see how long it will take all excessive surchargers to get on board with the ban.

Game-changing legislation

The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 introduced in Parliament last year and passed in February this year empowered a federal agency – the ACCC – to enforce the ban on excessive credit card surcharging approved by the RBA in March 2012.

The new framework places the onus on merchants to limit any surcharging to the cost of card acceptance, something CHOICE has long called for.

The new rules take effect on big businesses (such as airlines) on 1 September 2016 and smaller businesses on 1 September 2017.

Taxi surcharges have been left up to the individual states to regulate.

At long last, the ACCC will have the power to crack down on excessive surcharges, with further guidance expected from the regulator. 

"The ACCC is finalising online guidance material for consumers and businesses, which will provide further information on the ACCC's enforcement role, what businesses need to do in order to comply, and how consumers can make complaints if they believe a business has charged a payment surcharge that is excessive," Chairman Rod Sims said earlier this year. 

The new rules will apply to EFTPOS, Debit MasterCard, MasterCard Credit, Visa Debit, Visa Credit and American Express cards issued by Australian banks.

From cash grab to cost recovery

Under the new rules, banks will be required to provide clear information to merchants about the costs of processing credit card transactions, and merchants will be required to limit surcharges to that amount – far less than the amounts the worst surchargers have been foisting on consumers for so long.

Importantly, the banks will communicate the costs in percentage terms in most cases, which should put an end to the sky-high fixed rate surcharges imposed by the airlines and other flagrant offenders. 

What's the cost of card acceptance?

Since 2012, credit card surcharges are supposed to have been limited to the reasonable cost to the business of processing the transaction, generally less than 1% for a major business processing a Visa or MasterCard transaction and up to 2% for American Express and Diners Club

But the 2012 ban, which was always a bit fuzzy, had little impact and surcharges as high as 17% by the worst offenders – notably airlines – brazenly continued.

When we looked at the airlines earlier this year, excessive surcharges were still very much at play. 

  • Qantas: $7 card payment fee on a $200 ticket = 3.5% surcharge.
  • Virgin: $7.70 card payment fee on a $135 ticket = 5.70% surcharge.
  • Jetstar: $8.50 card payment fee on a $85 ticket = 10% surcharge.
  • Tiger: $8.50 card payment fee on a $95 ticket = 8.95% surcharge.

As of March 2015, Australian consumers were being charged a collective $1.6 billion a year according to MasterCard data made available to CHOICE at the time.

See our report on excessive surcharging by airlines and find out how to avoid credit card surcharges where they still exist. 

A surcharge by any other name

The legislation also takes aim at one of the surchargers' favourite tactics – to keep on surcharging but to call it something else. A new lexicon of euphemisms, including "booking fee" and "service fee", emerged following the 2012 RBA ruling. Under the new legislation, it will be considered a surcharge if it looks like a surcharge, and financial penalties will apply.

Whether such penalties will act as a real deterrent remains to be seen.

Where do the credit card companies fit in?

Visa and MasterCard card haven't liked excessive surcharging any more than consumers – and they also haven't been able to stop it. We talked to Visa in November 2014 and were told the company was pushing for a more effective surcharge ban after an unsuccessful effort to bring merchants and financial institutions into line since the 2012 RBA ruling.

"It is clear the current system is not working," a spokesperson said. "If we are going to see any real reduction in the level of surcharging, there needs to be clearer limitations on the reasonable cost of acceptance and enforcement by a public agency. Consumers should not be penalised for choice at the checkout when they pay with a credit or debit card."

Visa made the same point in its 2014 submission to the government's Financial System Inquiry. And consumer research commissioned by Visa at the time showed "there is strong support for appointing a government agency to enforce existing limits on surcharging", the spokesperson said.

CHOICE fights for fairer fees

CHOICE surveyed 1045 consumers in May 2013, asking them to weigh in on their recent surcharging experiences. Of the respondents who had used their credit card in the past three months, 44% said they'd been hit with a surcharge.

In June 2013, CHOICE delivered a petition calling for an end to excessive surcharging, signed by over 6700 consumers, to then Assistant Treasurer David Bradbury.

How do you know if the surcharge is excessive?

Under the new legislation, surcharging will be limited to the cost to the business of accepting a card payment and banks will be required to give businesses clear information about what those costs are. There is no exact formula, but a surcharge of $8.50 for an $85 Jetstar ticket, for instance, would clearly exceed the cost of processing the credit card transaction.


DISCLOSURE FROM CHOICE: Our CEO Alan Kirkland is part of an independent expert panel appointed by the federal government to review the framework for external dispute resolution and complaints in financial services. You can find out more about the review and make a submission through the Treasury's website.


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