Make sure you don't charge excessive payment surcharges

New laws were introduced to address excessive payment surcharges from 1 September 2016 (for large businesses) and 1 September 2017 (for all businesses). These laws impact members who accept card payments from:

  • MasterCard;

  • Eftpos;

  • Visa; and

  • American Express.

The Reserve Bank of Australia (RBA) has set out the payments covered by the ban in the RBA standard. The RBA standard also determines the processing costs for a business accepting payments via these methods.

Gift retailer Red Balloon has been fined $43,200 by the ACCC for excessive payment surcharges. This article will help ensure our members comply with the rules.

The Laws

The new laws ban businesses from passing on excessive surcharge fees to their customers. Businesses must only pass on what it costs them to process these payments, which is known as the “cost of acceptance”.

If a business is charged 1% by their financial institution for accepting Visa payments, they must only pass on a surcharge of 1% to their customers. Charging an amount greater than 1% is an excessive payment surcharge fee.

Compliance Tips

Chamber members are advised to consider the following ways to ensure compliance with the laws.

1. Determine Whether The Laws Apply to You

If you choose to pay the cost of acceptance yourself, or absorb the fee into your cost of goods and services, you will not be affected by these laws.

2. Know the Permitted Surcharge Fee for Each Payment Method

Your financial institution can provide you with an annual statement to help you calculate the costs for each payment method.

3. Ensure a Fixed Surcharge Fee is Compliant with the Laws

You are allowed to set a fixed surcharge fee for all card payments to make it easier to manage your payment processes. However, this surcharge fee must not exceed the cost of acceptance of any transaction.

If your financial institution charges you 1% for Visa and 2% for MasterCard, you must set your fixed surcharge fee to the lowest amount (1%). This will ensure that you are not passing on an excessive payment surcharge fee.

4. Review Your Surcharge Levels Annually

The cost of acceptance may fluctuate from month to month. However, the RBA standard allows you to review your surcharges annually. This process allows you to regularly assess compliance and reduces the risk of disputes arising.

This article does not constitute legal advice.

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