Surcharges under the ACCC microscope
The recent action taken by Australia’s consumer watchdog, the ACCC, against Europcar is a reminder for all business owners to ensure they are not charging “unreasonable” credit card surcharges.
The Australian Competition & Consumer Commission (ACCC) has started proceedings in the Federal Court against Europcar for excessive credit and debit card payment surcharges, which is allegedly in breach of Australia Consumer Law (ACL).
This recent action shows that the ACCC is paying particular attention to credit card surcharges that are seen to be excessive.
Business owners should take note that in complying with ACL, they can only charge customers the actual cost to the business of processing a payment.Businesses cannot simply pick an amount or ‘round up’.
For example, if the cost of acceptance for Visa credit is 1 per cent, a business can only add a surcharge of 1 per cent for customers who pay by Visa credit card.
What is known as the ‘excessive surcharging ban’, came into effect in 2016 and late last year was extended to all businesses that are either based in Australia or use an Australian bank. The ban does not affect businesses that choose not to apply a surcharge to payments.
The ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.
This means that businesses can only surcharge the amount it actually costs them to process card payments, including bank fees and terminal costs. Businesses are not allowed to add on their own internal costs when calculating what surcharge they will charge customers. The only costs businesses can include are external costs charged by their financial provider.
In this case, it is said that Europcar overcharged between 0.18% and 0.65% on various cards, between July – November 2017.
Europcar did not reduce its surcharges despite being notified by its bank in July 2017 of the actual cost to accept payments by these cards. Instead, it is alleged Europcar continued to charge customers in excess of this amount, in breach of the law.
“The alleged conduct by Europcar in relation to its surcharge rates is particularly concerning, given we will allege, that it was well aware of its own cost of acceptance from at least July 2017,” ACCC Chair Rod Sims said.
“The ACCC’s action serves as a warning that the ACCC is paying close attention to those businesses who seek to overcharge customers making payments by credit or debit cards.”
Whilst this is the first litigation that the ACCC has commenced under the excessive surcharging provisions, earlier this year ACCC issued a notice for excessive payment charges to another business, and that business had to pay a $12,600 penalty.
Again, this was due to the business charging customers a surcharge above the cost of the payment facility that was actually incurred by the business.
The ACCC’s proceedings only relate to outlets which are owned and operated by Europcar and not those run by franchisees. In Australia, 96 out of 126 Europcar outlets are owned and operated by Eurpocar.
If the Federal Court decides that Europcar's actions were unlawful, it could face a penalty of $1.35 million for each offence.This depends on how many offences the court finds.
The ACCC will investigate consumer complaints and take enforcement action where necessary.
We recommend that business owners ensure their payment charges are compliant with the ACL.
If you require any assistance regarding credit card surcharges contact McKays Commercial Property team.