How many times have you bought an airline ticket, a theatre or concert ticket, and been asked to pay a large surcharge at the final stage of the transaction?
It will be illegal – from today – for large companies to keep doing so.
They will no longer be allowed to charge customers more than what it costs to process such payments, and they will be hit with large fines if they do.
A company could be forced to pay $1.1m if court action is taken for breaching the law. It means airlines can no longer charge high, fixed-amount surcharges on their tickets – a particular bugbear for Australian travellers.
The law change affects payments made by MasterCard, Visa, Eftpos, and American Express “companion cards” issued by Australian banks.
Rod Sims, the Australian Competition and Consumer Commission chairman, says it will put an end to one of the most frustrating experiences for consumers. He says transactions by debit cards will now only incur a rough 0.5% surcharge, Visa and MasterCards 1.5%, and American Express companion cards 2.5-3%.
“In short, the new provisions will limit the amount businesses can surcharge customers for use of payment methods such as most credit and debit cards,” Sims said.
But Christopher Zinn, the consumer advocate who spearheaded the “surcharge free” movement, said consumers must still be vigilant about surcharging as companies adjust to the new regime.
He said it won’t necessarily mean that costs will go down for consumers: “It’s a better thing for consumers in that the very excessive surcharging and the fairly shonky system of fixed-dollar amounts from the airlines has bitten the dust, that’s a good thing,” he told Guardian Australia.
“But there is a real chance that by pruning excessive surcharges that does give a green light for many more companies that currently don’t surcharge to impose surcharges, and while the amount might be less, the width and breadth of the surcharging environment might be more.
“I think that is a possibility and should be taken into account,” Zinn said.
Qantas announced its new card payment regime in July, to take account of the changes. But critics have noticed that the benefits are skewed towards cheap and short flights, while international business and first class travellers are likely to pay more than double what they were previously being charged.
The new law applies to “large merchants” from Thursday, and will apply to all other merchants from 1 September 2017, giving smaller companies time to adjust.
A “large merchant” is defined as one that satisfies at least two of the following requirements: it has a consolidated gross revenue of $25m or more, the value of its consolidated gross assets is $12.5m or more, or it employs 50 or more employees.
Payment types not covered by the ban include: Bpay, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.The ban does not apply to any payments made for taxi services. These were excluded from the RBA standard because the industry is already regulated by state and territory regulators.
The new surcharging law arose out of a recommendation from the financial system inquiry. The inquiry had the objective of improving price signals in the economy and reducing the potential for “cross-subsidisation” between customer groups and merchant groups. It received more than 5,000 submissions related to credit card surcharges, most of which called for surcharges to be banned.
