Millions of NSW residents charged illegal fees by government

The NSW government has referred allegations of “possible serious maladministration” to the state’s anti-corruption watchdog after it discovered millions of people have been charged merchant fees for services such as driver’s licence renewals, despite repeated legal advice to the former government warning the practice was unlawful.

State Finance Minister Courtney Houssos on Wednesday revealed two government agencies – Revenue NSW and Service NSW – had charged about $144 million in merchant fees since 2016 across 92 million card transactions.

Finance Minister Courtney Houssos and Customer Service and Digital Government Minister Jihad Dib at Parliament House on Wednesday.Credit: Dominic Lorrimer

The payments were charged despite the practice being flagged as unlawful in legal advice received from the Crown Solicitor’s Office on three occasions between February 2016 and December 2022, Houssos revealed on Wednesday.

The government has referred the matter to the NSW Ombudsman for investigation, as well as the ICAC, citing “possible serious maladministration” and the “apparent failure to act on the Crown Solicitor’s advice” in 2016.

“I find these revelations extremely concerning, and I can’t see how there is an excuse for a government agency to be repeatedly advised that an activity is unlawful and to continue doing it,” Houssos said.

The referral to the ombudsman would be likely to include whether the advice from the crown solicitor was passed on to government ministers at the time. “These are serious allegations,” Houssos said.

The government said the three pieces of legal advice had been given in February and October 2016, and again in December 2022. Shadow Treasurer Damien Tudehope, who was finance minister in two former Coalition governments, including when the final piece of legal advice was given, said he had never seen any such warning.

“I’m not denying that [the advice] exists, but I don’t recall ever seeing any such advice, and if I had received any advice, I would have raised it immediately,” Tudehope said.

“If there’s an agency in possession of that crown solicitor’s advice, I’ve encouraged them to produce it.”

Victor Dominello, the retired MP who was the minister for customer service in the former government, said he also had no recollection of receiving advice on the scheme, and pointed out that the practice of collecting merchant fees began in 2012 after a directive from NSW Treasury.

“I have no recollection of ever being briefed on this matter nor the CSO advice mentioned in the article,” he said.

“If I was ever informed of an unlawful practice I would have asked for it to cease immediately.”

NSW Opposition Leader Mark Speakman called for an immediate refund of the unlawful fees.

The payments are mostly small. Renewing a driver’s licence for three years costs $162. The merchant fee on that transaction would amount to about 71¢, the government said. Houssos said modelling had shown that over the eight years in which the charges were in place, the average person would have paid about $30 in unlawful fees.

But Minister for Customer Service Jihad Dib said it was “about the principle”.

“It’s about the fact that people expect the government will always behave properly … Minister Houssos and I are so absolutely gobsmacked … how was this allowed to happen? How did this continue when there had been evidence of legal advice going back to 2016 where it was said this is not allowed?” he said.

However, the government said it could not commit to refunding the illegal payments, in part due to the complexity of identifying who had paid what as a result of privacy stopgaps in online payment systems. Dib said the government was “working on a number of different potential strategies”.

“There are a number of different potential ways of addressing this, and we’re going to go through step by step. We would ask that people be patient with us,” he said.

The issue was first identified by the NSW auditor-general while it was reviewing the books of the Department of Customer Service. The auditor then brought it to the attention of the current government. Houssos said she was first made aware of the issue in September.

Since then, the government said a taskforce had so far switched off fees being charged directly by Revenue NSW and the Rental Bond Board, and stopped fees on more than 80 per cent of Service NSW transactions.

The payments were unlawful because NSW government agencies require a specific legal authority to charge merchant fees for card transactions.

Some people may have paid more, however. While Revenue NSW and Service NSW comprise the vast bulk of the financial transactions paid to the government, other agencies were still in the process of checking whether they had the statutory authority to charge fees.

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