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Make Sure Your Surcharges for Credit and Debit Cards Aren't Excessive

Written on the 3 July 2017

From 1 September 2017, all Australian businesses will be banned from imposing excessive surcharges on electronic card payments (currently, the ban only applies to large businesses).

This means there will be a limit on the amount you can charge your customers for using eftpos (debit and prepaid), Visa, MasterCard, and American Express cards.
If you currently have a surcharge on electronic payments, you need to ensure that your business isn't breaking the law when it comes into effect for all businesses on 1 September 2017.

What is the ban on excessive charges?

The purpose of the ban is to stop businesses charging customers more than the actual cost of accepting the payment. The cost to a business of accepting each payment method is known as the 'cost of acceptance'.

A payment surcharge is excessive if it exceeds the cost of acceptance for that payment method.

For example, if your cost of acceptance for Visa Credit is 1% you can only surcharge 1% on Visa credit card payments. Basically, you are able to pass on the cost of the transaction (what the service provider charges you) but you are not able to make a profit on the transaction itself.

Of course, you are not required to impose payment surcharges that's your decision. If you do not impose surcharges the new law will not affect you.

Is your surcharge excessive?

To show that your costs are not excessive, you need to keep contracts, statements, invoices and other evidence which shows what your costs are, and to show that what you are charging is not more than what you are being charged. When calculating your costs, you can't include labour and utilities costs. You can only charge what you are charged.

To help you calculate your costs, your bank will send you monthly statements and an annual statement which sets out the charges to you for each payment method. These statements will help you to determine the level of surcharge you can pass on to your customers, should you decide to do so.

Enforcing the ban

The Australian Competition and Consumer Commission (ACCC) has been given new powers to enforce the ban and powers to investigate complaints relating to excessive payment surcharges, including requiring a business to provide them with evidence of the costs of processing a payment and costs charged.

If the ACCC has reasonable grounds to believe that a business has breached the ban, they can issue an infringement notice or take court action against the business, seeking pecuniary penalties.

For more information about your costs, contact your bank. To learn more about the law and your obligations, visit www.accc.gov.au/surcharges.

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