With the emergence of new and exciting payment methods, it is important to understand your obligations as a business owner around traditional ‘point of sale’ options. When consumers make a purchase using certain payment methods, surcharges may apply to the transaction (commonly referred to as Credit Card Fees). In 2016, new regulations were enacted to ensure that surcharging was not being used excessively and to the detriment of consumers. These regulations reflect the general trend towards Credit Cards being the primary method of payment, as fees were initially introduced when customers and businesses lived in a cash-based economy.
Whilst it is entirely at a business’s discretion whether to impose a surcharge or not, it is important to be aware of the regulations to ensure that you are conducting your business in a legally compliant way. Get in touch with a business lawyer through LawPath’s lawyer directory to ensure your business is complaint with the regulations.
What is a surcharge?
A surcharge is a charge added to a customer’s overall total for the goods and services sold. Credit Card Fees can apply when a customer pays with an Eftpos, Mastercard, Visa or an American Express card.
Is surcharging legal?
The short answer is yes. A surcharge is justified as a charge for the merchant covering the cost of processing the payment. Particularly for small businesses, accepting credit card payments for nominal payment amounts can be expensive, meaning that there is need for a Credit Card Fee to be charged. There are regulations governing what amount of surcharging is legal and the Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the regulations.
To assist businesses, the ACCC and Reserve Bank devised a method of calculating your cost of accepting the payment. Anything above this amount is deemed ‘excessive’ and you may be liable to the ACCC.
When is a surcharge ‘excessive’?
Have you ever bought a coffee, brandished your credit card, only to see the price increase 50 cents? If so, it is likely you have experience excessive surcharging.
Under s 55B of the Competition and Consumers Amendment (Payment Surcharges) Act 2016 (Cth), a surcharge is excessive if it exceeds the permitted surcharge amount referred to in the Reserve Bank standards or regulations. This slightly opaque definition is given greater clarity by the Reserve Bank: They suggest, as a guide, that an acceptable surcharge is within 0.5 – 2% of the transaction cost, depending on the method of payment.
Credit Card Fees: Legal, but Tightly Regulated
Whilst it is legal to charge consumers a Credit Card Fee, you need to ensure that the surcharge is not excessive or risk liability to the ACCC. LawPath can connect you with a business lawyer who can explore the different payment structures and find out which method works best for your business.
Need more help? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents, obtaining a fixed-fee quote from Australia’s largest legal marketplace or to get answers to your legal questions.
