A new ban on charging consumers excessive card payment surcharges by large businesses takes effect from today.

For the first year the law only applies to large businesses, defined as having two of the following: gross revenue of $25 million or more, gross assets worth $12.5 million or more, or with 50 or more employees. It will apply to all businesses from 1 September 2017.

The RBA has indicated, as a guide, that the costs to merchants of accepting payments by debit cards is in the order of 0.5 per cent, by credit card is 1-1.5 per cent, and for American Express cards it is 2-3 per cent. Some merchants’ costs might be higher than these indicative figures.

“The new law limits the amount a large business can charge customers for use of payment methods such as most credit and debit cards. Businesses can only pass on the permitted costs of the payment method such as bank fees and terminal costs,” ACCC chairman, Rod Sims, said.

Source: ACCC
Source: ACCC

“The new law has caused many large businesses to review their pricing practices. We expect to see a move from flat-fee surcharges for purchasing items like flights, towards percentage-based or capped surcharges. The ACCC is aware that some event ticketing companies are intending to change their pricing practices from 1 September such that consumers will no longer be charged fees based on the payment method chosen.”

Mr Sims said all large businesses need to ensure their payment charging methods are in line with the new law.

Booking and service fees still apply

Businesses can still charge other fees, such as ‘booking fees’ or ‘service fees’ which apply regardless of payment method. Businesses must still comply with Australian Consumer Law in terms of ensuring the disclosure of  fees is clear.

Passing on the cost of processing debit and credit card payments is not mandatory for businesses. Indeed, the ban has no effect on businesses that choose not to impose a payment surcharge.

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