The new ban on excessive payment surcharges
In February 2016, the Competition and Consumer Amendment (Payment Surcharges) Act 2016 (Cth) introduced new part into the Competition and Consumer Act 2010 (Cth) banning excessive payment surcharges (s 55B). It provided new powers for the ACCC to enforce the ban and to ensure businesses take steps to comply with the law. A payment surcharge is considered excessive if it exceeds the ‘cost of acceptance’.
Businesses will need to limit the amount it charges its customers for use of payments methods such as credit and debit cards. The limit will be linked to the direct costs of the businesses’ payment method such as bank fees and terminal costs. If the businesses impose a payment surcharge, it can only pass on to its customers what it costs them to process a payment.
It’s also important to put any agreements you make with your co-founders in writing, (i.e. Shareholder’s Agreement or Partnership Agreement). This makes sure everyone is clear on how the start-up will be run, who owns what, and will minimise misunderstandings.
If your cost of acceptance for Visa Credit is 1% you can only surcharge 1% on Visa credit card payments onto your customers.
The Difference Between a Surcharge and a Processing Fee
In short, if you impose a fee, however you describe it, that is payable on some payment methods but not others, then it is likely to be considered a payment surcharge.
The ban does not prevent you from charging fees that are genuinely unrelated to payment methods, however you will need to consider whether the processing fee would fall within the definition of payment surcharge.
What payment types are included and excluded from the ban?
The ban covers surcharges on typical card payment methods:
- Eftpos (debit and prepaid)
- MasterCard (credit, debit and prepaid)
- Visa (credit, debit and prepaid)
- American Express “companion cards” (American Express cards issued through an Australian financial service provider, rather than directly through American Express)
Excluded Payment types:
- Diners Club cards
- American Express cards issued directly by American Express