SMEs urged not to fall afoul of new surcharge rules

Business owners are being urged to act now as a ban on ‘excessive’ payment surcharges will soon take effect.

In May 2016, the Reserve Bank of Australia introduced a limit on the surcharge passed onto customers for the use of credit or debit cards when making purchases.

This came into effect for large merchants on 1 September 2016, however it will become applicable to all businesses regardless of size as of the same date in 2017.

SME owners are being urged not to leave it until the deadline arrives to make changes to their pricing policy to avoid getting caught out.

“Businesses that choose to impose payment surcharges should review their surcharge levels to ensure they are compliant when the ban starts applying to them,” said ACCC deputy chair Dr Michael Schaper.

What constitutes an “excessive” payment surcharge?

While the definition of excessive can be open to wide interpretation, the law effectively bans businesses from profiting from any payment surcharge.

“Businesses can only pass on to customers what it costs them to process a payment such as bank fees and terminal costs,” Dr Schaper said.

“For example, if your cost of acceptance for Visa credit is one per cent, you can only surcharge one per cent on Visa credit card payments onto your customers.”

According to Dr Schaper, SME owners will soon be hearing from their bank or financial institution outlining exactly what their costs are, and hence what they can choose to pass onto their customers.

“Banks are required to send businesses merchant statements which clearly set out the business’ costs of acceptance for each payment method. The ACCC urges businesses to follow up with their bank if they have not yet received these statements,” he said.

Exceptions to the rule

Like most rules and regulations heaped onto the shoulders of business owners, the payment surcharge rule is not entirely black and white.

The ACCC notes that several types of payments are exempt from this particular requirement. These include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

Penalties for non-compliance

The ACCC has been tasked with enforcing the new rules, which has the power to issue steep fines for non-compliance.

Fines will be set at:

  • $108,000 for a listed corporation
  • $10,800 for a body corporate
  • $2,160 for a person other than a body corporate.

Additionally, the competition regulator also has the power to launch court proceedings against offending businesses, at which pecuniary penalties can be sought to the amount of $1,164,780 for body corporates and $233,100 for a person other than a body corporate.

The ACCC has published guidance material for businesses to help them navigate the new regulation.

Surcharge not mandatory

As the ACCC points out, it is not mandatory for businesses to pass on the cost of processing debit and credit card payments.

Some businesses, such as homewares retailer House, refrain from passing on this cost to customers, suggesting that it actually reduces profitability and impedes growth in the long run.

“More often than not, it actually creates a negative perception on you as a retailer: the customer doesn’t necessarily see it as a charge that the merchants levy or one of the financial institutions. They see it as the retailer levying that charge on them, so they tend to always walk away with a negative connotation,” House Group CEO Darron Kupshik has previously told My Business. 

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