Big or small: you must comply – Countdown on for excessive credit card surcharges

Reminder the electronic transaction ban starts tomorrow. Click here for a brief update.

Bans against excessive credit card surcharges will extend to small businesses from 1 September 2017. This means from this date, all businesses will be caught by the ban regardless of their size.

A small business is defined as one that satisfies two or all of the following characteristics, taking account of the business and its related bodies corporate:

• consolidated gross revenue for the financial year of $25 million or less;
• value of consolidated gross assets at the end of the financial year of $12.5 million or less; and/or
• less than 50 employees (whether full time, part time, casual or otherwise) at the end of the financial year.

The payment types affected by the ban are EFTPOS, MasterCard (debit and credit), Visa (debit and credit) and American Express “companion cards” (Amex cards issued through an Australian financial service provider, rather than directly through American Express).

A payment surcharge is deemed “excessive” if the surcharge exceeds the business’ costs of acceptance for each designated payment type. Business costs of acceptance are based on what the business is charged by the payment facilitator and generally include:

• merchant service fees;
• fees paid for the rental and maintenance of payment card terminals; and
• any other fees incurred in processing card transactions, including cross-border transaction fees, switching fees, and fraud related chargeback fees.

For businesses which choose to incorporate the surcharge into the price of their goods or services, the bans do not apply. In addition, surcharges levied for using BPay, PayPal, Diners Club and American Express Cards (issued directly by American Express), or for making payments by cash or cheque, will not be impacted.

If the ACCC reasonably believes that a business is not complying with the ban on excessive surcharging, they can pursue various remedies including:

• fines of approximately $10,000;
• pecuniary penalties of approximately $1.1 million;
• injunctions;
• enforceable undertakings.

With the ban on small businesses soon to take effect, now is an ideal time to update your terms and conditions and review your payment surcharges. If you are concerned or remain unsure whether these changes could impact you and your business, please contact us for further information and advice.

This article was written by Patrick Smith, Lawyer – Commercial.