As the debate about surcharging on purchases fires up, the Reserve Bank has quietly granted several stakeholders and banks extensions to last week’s deadline for submissions.
Several players are using the extra time to finesse their submissions to the central bank, even as others were able to meet the initial December 3 cut off. The RBA’s broad review into retail payments regulation will come to a head next year and the controversial practice of surcharging may not survive in its current form.
It’s an issue that we’ll hear plenty more about as consumers butt up against businesses who argue surcharging should be retained to ensure they can recoup payment-related costs.
Interestingly, Westpac’s submission to the RBA – which is yet to be made public – supports a ban on surcharging of debit transactions but doesn’t call for a prohibition on credit card transactions.
The bank reckons a cap on surcharges for credit card transactions should be applied alongside the competition regulator upping its enforcement in the area.
“The monitoring of merchant surcharging practices needs to be better managed and enforced,” Westpac’s submission says. “The enforcement initiatives by the ACCC (Australian Competition and Consumer Commission) have been limited in their scope and frequency. This has led to some issues, such as over-surcharging.”
Payments industry stalwart Grant Halverson, of consulting firm McLean Roche, used his submission on surcharging to label the RBA and ACCC enforcement of the practice as “totally ineffective”.
His submission says the little enforcement of surcharging rates created a “free for all”.
“The ability to charge consumers surcharges, in many cases at excessive rates, removes any need for all merchants to seek out the lowest cost from acquirers,” Halverson’s submission says.
Halverson’s submission notes subsidiaries of Nine Entertainment paid penalties of $159,840 and $450,000 in consumer redress for allegedly levying subscribers and advertisers excessive payment surcharges.
Prior to that, excessive surcharging sparked controversy in 2010 when Cabcharge was levying a 10 per cent charge on card payments in taxis and admitted to breaching the Trade Practices Act through its market dominance. At the time, Cabcharge agreed to pay penalties and costs of $15m in a settlement with the ACCC.
In 2016, consumers won a long battle against domestic airlines on excessive credit card surcharging, as regulators clamped down on the practice.
While there has been a smattering of cases, the practice of vendors and retailers charging more than their payment costs is not unusual. This columnist was subjected to a surcharge of more than 5 per cent on a food purchase just last week.
National Australia Bank chief Andrew Irvine in August questioned whether credit and debit card surcharges were fit-for-purpose, after he was slugged with a 10 per cent surcharge on a coffee in Sydney.
Irvine told the parliamentary standing committee on economics he found the surcharge levied on his coffee “outrageous”, and more broadly took aim at inconsistent, and confusing surcharges.
Halverson in his submission calls for all payment surcharges to be banned.
“Australia should join the rest of the world (go back to pre-2002 days) with card payment costs considered just another business input cost,” his submission says.
“Prices should not need to show any separate inputs (GST aside), and this will give a clear signal to all consumers.”
Halverson’s submission also cites an array of surcharging placards and signs at retail stores and food venues, that carry either excessive surcharge rates or incorrectly cite credit card merchant fees.
Westpac’s submission to the RBA says it supports banning surcharging on debit purchases to ensure consumers have a “fee-free alternative” to buying with cash.
The bank argues the proposition is different for credit cards as there are other benefits linked to them, think rewards points, a line of credit and fraud liability. Westpac believes a cap on credit card surcharges is the “simplest and most enforceable” way to ensure retailers and merchants are not charging more than a maximum specified percentage of the purchase price.
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