Dishonour fees hurting vulnerable amid cost of living crisis, says payments provider GoCardless

Exorbitant fees tacked on to failed payments can be as much as 350 times the cost of the transaction and are ‘driving vulnerable Australians deeper into financial difficulty’.

GoCardless ANZ acting general manager Kyle Willersdorf.

Payment service providers are running a rort against Australian consumers, charging excessive dishonour fees that can be as much as 350 times the cost of a failed transaction, a payments provider has claimed.

Dishonour fees – often tacked on to failed payments for gym memberships, childcare fees, beauty services and software applications – had become a “huge issue”, with consumers ripped off and losses for businesses who were losing customers, said GoCardless local boss Kyle Willersdorf.

“These excessive mark-ups bear no relation to the actual processing cost. Instead, they’re burning holes in the average Aussie’s pocket during a cost-of-living crisis,” he told The Australian.

The comments come as payment surcharges are under the microscope, with the Reserve Bank having opened the door to banning surcharges by next year, which would spark the biggest shake-up of the payments industry in years.

Payment surcharges could be banned by the RBA.

Mr Willersdorf has called on the government and RBA to extend that scrutiny to failed payment fees, telling The Australian they are “driving vulnerable Australians deeper into financial difficulty, creating unnecessary hardship and distrust”.

“(Surcharges and dishonour fees) are just as big a problem as each other, and the impact they have on consumers means they equally require attention from policymakers,” he said.

“It’s time for the industry to re-evaluate what is considered a fair way to make money. More importantly, this is an opportunity for the government and regulators to step in and stamp out these unfair and unethical fees.”

GoCardless research found that dishonour fees can be as much as $35 per failed transaction, – with typical failed payment fees ranging between $14.90 and $35 for health and fitness, childcare, real estate, software and education services using EzyPay.

EziDebit charged customers $29,90 and merchants $9.90, while Debit Success charged consumers $14.95 and Pay Smart charged up to $15.90. Pay Advantage charges $4.95 and Stripe charges $2.50.

Mr Willersdorf said the problem was made worse by the fact that some banks added their own failed payment charge on top of payments providers, with the combined fees rising as high as $70 per failed transaction.

CBA typically charged $5 per failed direct debit transaction or $15 per day for an overdraw. In some cases there is an interest charge of 14.9 per cent.

Westpac and NAB don’t charge dishonour fees but charge $15 and $35 respectively for overdraft fees.

ANZ charges $5 per failed debit transaction plus a $3 monthly fee and as much as 18.9 per cent interest in some cases.

Last year Australia’s largest banks were forced to pay back $28m after the Australian Securities & Investments Commission found they charged exorbitant fees to vulnerable customers.

Commonwealth Bank, Westpac, Bendigo and Adelaide Bank and ANZ charged 150,000 customers – many of whom were relying on welfare payments – more than $6m for high-fee accounts when they were eligible for low-charge equivalents, ASIC’s investigation found.

GoCardless says failed payment fees ‘bear no relation to the actual processing cost’. Picture: iStock

Failed payment surcharges often did not take in consideration the customer’s circumstances, Mr Willersdorf said, and in some cases were significantly higher than the service consumers had signed up for.

The average Australian paid $63 per month or $56 per year for gym membership, according to Canstar Blue research polling over 1500 fitness providers across the country last year. Those aged 18-24 paid $55 per month on average while Australians aged between 55 and 64 paid an average of $70 – the same amount as the maximum dishonour fee for one failed transaction, according to GoCardless.

Other factors added to the likelihood of consumers being charged dishonour fees. Payments taken from a bank account were three times more likely to be processed than payments taken via card, Mr Willersdorf said.

Cards were more likely to fail, sometimes due to factors beyond the customer’s, control including card blocking due to fraud or scam attempts, cards expiring or self-placed temporary bans due to a wallet being stolen, he said.

Originally published as Dishonour fees hurting vulnerable amid cost of living crisis, says payments provider GoCardless