New card surcharge laws could shift small businesses from perpetrators to beneficiaries

After continued discussions around the exploitative nature of card surcharges, the Albanese government has planned a crackdown on the more excessive charges, through the ACCC.

A total of $2.1 million of new funding for the Australian Competition and Consumer Commission (ACCC) has been announced by the Albanese government. The goal of the funding is to tackle unfair and excessive card surcharges that are taking money out of the pocket of Australian consumers at an accelerated rate.

The government is prepared to ban debit card surcharges (in conjunction with further work by the Reserve Bank of Australia) and other safeguards to ensure that small businesses and consumers benefit from lower costs.

With the use of cash on a steep decline and electronic payments on the rise, these surcharges accumulate over time and kick the Australian consumer while they’re down due to the cost-of-living crisis.

“This is all about getting a better deal for consumers, reducing costs for small businesses, and promoting a more competitive payments system,” said Prime Minister Anthony Albanese.

“Consumers should not be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves.”

The Reserve Bank of Australia (RBA) is responsible for regulating the payments system and is undertaking a review of merchant card payment costs and surcharging. Along with the boost for consumers, cost payment fees will also be lowered for small businesses, which have recently been accused of passing on these higher fees to their customers.

As reported by The Australian Financial Review, small businesses are allegedly hitting customers with much higher debit and credit card charges than required in an attempt to garner Qantas Frequent Flyer points as a reward.

This is derived from Live Payments, which leases payment terminals to small businesses that charge higher processing fees based on how many Qantas points the user wants to earn by employing their system.

Businesses are charged a 2.6 per cent process fee for each transaction and are given one Qantas point for every dollar spent through the terminal. Under current surcharge laws, however, small businesses that use these terminals can pass this full cost per transaction to consumers.

Businesses currently are allowed to surcharge customers to accept payments but are limited to only charging the cost of processing such payments. The line becomes blurry when small businesses are surcharging consumers through hidden charges and benefit from it through garnering Qantas points.

Of course, small businesses especially cannot bear the cost of processing such payments, thus offsetting the toll to consumers through surcharges. Yet, when hidden motives such as the Qantas points are presented, it really muddies the water for consumers.

However, with the costs being lowered and the RBA now regulating the payment systems with more vigour, small businesses may struggle to hide these payments in the transactions, as justifying so would be a difficult endeavour.

“This is all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system,” said Treasurer Jim Chalmers.

“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves.

“We’re prepared to ban debit card surcharges, subject to further work by the Reserve Bank and safeguards to ensure small businesses and consumers can both benefit from lower costs.”

The new laws and funding will enable the consumer watchdog to crack down on illegal and unfair surcharging practices and increase education and compliance activities.

Minister for Financial Services and Assistant Treasurer Stephen Jones believes these laws will give small businesses “a fairer go”, meaning consumers will also not have to front the cash.

“These actions will give small businesses and consumers a fairer go. The surcharges pile up and punch a big hole in the wallets of customers and the takings of small-business owners,” Minister Jones said.

“This is good news for consumers and for small business owners and will help our payment systems keep up with the digital economy.”