The government has passed new laws on credit card surcharging. But will they save us cash?
IT’S BEEN hailed as the reform that could save Australian shoppers hundreds of millions of dollars a year — but some fear it will have the opposite effect.
The Federal Senate this week passed new legislation cracking down on the credit card surcharges that fleece us by as much as $800 million a year.
Corporations that engage in “excessive surcharging” at the cash register will be fined up to $108,000 for each contravention, with the ACCC tasked with policing the law when it comes into effect later this year.
It comes after years of lobbying by consumer advocates against hefty fees of up to 10 times the actual cost of processing a credit card.
Among the worst offenders, according to consumer group Choice, are Australia’s four domestic airlines, with Jetstar charging $8.50 on an $85 fare believed to cost just 66 cents to process.
Treasurer Scott Morrison said the new laws would give consumers a fair deal.
“While many merchants do pass on costs fairly, some merchants engage in this practice abusively,” Mr Morrison said in a statement.
“That’s why the Turnbull Government took action to ensure customers are charged no more than the amount that reflects the true amount of the merchant’s costs in accepting that payment.”
Klaus Bartosch fears the new laws could make things worse.Source:News Limited
But the man whose three-year campaign put the issue on the national agenda fears the new law could actually make things worse.
Queensland businessman Klaus Bartosch, whose Change.org petition calling for surcharges to be banned resulted in 5000 submissions to the Murray financial system inquiry, said he feared the new laws would encourage more businesses to impose surcharges.
“It would be far better to ban it outright,” Mr Bartosch argued.
He said while a number of large corporations had been imposing credit card surcharges for years, many smaller businesses had shied away from the practice.
“There’s been uncertainty around whether or not surcharges are legal. And retailers have been confused about whether they’re allowed to do it,” he said.
“Now that uncertainty has gone away and they can have a free for all ... I’m guessing the government feels that competition among businesses will prevent it, but retailers are under pressure. If they can impose a credit card surcharge, they will.”
He also questioned the ACCC’s ability to keep up with the thousands of complaints that would likely ensue if surcharging became more widespread.
THE SURCHARGE MONEY PIT
Research commissioned by MasterCard in 2014 showed that Australians were paying about $1.6 billion a year in surcharges.
“I think that will escalate to 6 or 7 billion,” Mr Bartosch said.
It is not known how many Australian retailers currently impose a surcharge. We spend about between $300 billion and $450 billion a year on credit cards.
Credit card surcharges are charged by a range of retailers, including those who only cover the cost of processing the credit card with their bank — usually about 0.5 per cent of the transaction — along with those who charge as much as 10 times that amount.
It remains to be seen how the Reserve Bank of Australia, charged with setting the benchmark for appropriate fees, will define “excessive” surcharges.
Consumer group Choice welcomed the new legislation, saying it would create “some genuine power for these charges to be investigated”.
“We are delighted that the ACCC has finally been given the power to investigate if a surcharge is fair and issue infringement notices of up to $108,000 for companies that don’t play by the rules,” Choice spokesman Tom Godfrey said.
