The retail industry has hit back at suggestions that excessive surcharging of credit cards is becoming more widespread.
THE retail industry has hit back at suggestions that excessive surcharging of credit cards is becoming more widespread.
It says there is no need for the Reserve Bank to rein in the practice.
The central bank is going through about 40 submissions made to its review on surcharging. A June report from the Reserve Bank found the largest merchants - with annual turnover in excess of $530 million - were the most likely to slug consumers with a surcharge for paying by credit card. It also found that, as of December last year, about 30 per cent of merchants imposed a surcharge on at least one of the cards they accepted.
In its submission, the National Retail Association, representing national retail chains and independent retailers, said there was no case for a surcharge limit. ''The vast majority of our members do not pass on any surcharge to customers, regardless of the method of payment,'' the association said. ''To the extent that surcharging exists in the retail sector, we are not aware of any instances of excessive surcharging.''
However, the director of policy and campaigns at the Consumer Action Law Centre, Gerard Brody, said more action was needed to prevent price gouging by merchants.
''We are concerned that there are some retailers, particularly online, implementing credit card charges far above the cost of the credit card payment mechanism and more does need to be done to stop it,'' he said.
The head of campaigns for Choice, Matt Levey, said surcharges should reflect the direct cost of the transaction and nothing more.
''The only retailers that would be targeted by a cap are those who are excessive,'' Mr Levey said.
He said the biggest offenders of surcharging were airlines, the taxi industry, telecom companies, holiday travel businesses and utilities.
The Australian Taxi Drivers Association said any changes to standards would be ignored by large and powerful retailers unless a limit to surcharges was made mandatory.
''There is no reason to indicate that further reforms now mooted will make any greater difference ? large and dominant merchants will simply continue to do as they please, and smaller merchants will tag along,'' their submission said.
They were particularly concerned about the 10 per cent surcharge imposed by Cabcharge on card-paying customers.
In 2003, the Reserve Bank lifted restrictions to allow surcharging of MasterCard and Visa credit systems in a bid to stop merchants from adding the cost of accepting card payments to the prices of their goods and services, which would have to be paid by all customers regardless of payment method.
Concern has since grown that merchants are using surcharging as another way of making revenue rather than just applying a surcharge to cover the cost of accepting cards.
But the Australian Merchant Payments Forum, which represents merchants within the payments sector of the economy, said there was no need to change standards. ''The AMPF does not believe there is sufficient credible evidence to support the view that there is widespread excessive surcharging taking place in the market today,'' its submission said. ''Many of the largest merchants do not surcharge at all.''
Capping surcharges at the cost of the card processing fee would leave merchants out of pocket, it said, as it would not factor in other costs associated with card payments including charge backs, terminal rental, stationery and investigating disputed transactions. A 2010 Choice report on surcharging found nearly 90 per cent of respondents had paid a surcharge within the past year.
Frequently Asked Questions about this Article…
What is credit card surcharging and why should everyday investors care?
Credit card surcharging is when a merchant adds an extra fee to a customer’s bill for paying with a credit card. Everyday investors should care because surcharging can affect retailers’ pricing, customer behaviour and potentially retailer revenues and margins — particularly if merchants use surcharges as an additional source of income rather than merely to cover card costs, a concern raised in the article.
What did the Reserve Bank review find about who is most likely to impose surcharges?
The Reserve Bank’s June report found the largest merchants — those with annual turnover above $530 million — were the most likely to charge customers a credit card surcharge. The review also noted that as of December last year about 30% of merchants imposed a surcharge on at least one card they accepted.
Are regulators considering limits or a cap on credit card surcharges?
Yes. The Reserve Bank is reviewing submissions (about 40 were received) on surcharging and whether any reforms are needed. Some consumer groups want action to prevent excessive surcharging, while industry groups such as the National Retail Association and the Australian Merchant Payments Forum (AMPF) argue a cap is unnecessary based on current evidence.
What positions do retail industry groups and consumer advocates take on surcharge caps?
Industry groups like the National Retail Association and the AMPF say most retailers don’t pass on surcharges and that there’s insufficient evidence of widespread excessive surcharging, so standards don’t need changing. Consumer advocates, including the Consumer Action Law Centre and Choice, argue surcharges should reflect the direct cost of the transaction and that more action is needed to stop excessive fees, especially online.
Which types of businesses were identified as the biggest offenders for high surcharges?
The article names airlines, the taxi industry, telecom companies, holiday travel businesses and utilities as sectors where surcharges tend to be higher or more problematic, according to consumer campaigners.
What’s the controversy around Cabcharge and its 10% surcharge?
The Australian Taxi Drivers Association specifically highlighted concern about Cabcharge’s 10% surcharge on card-paying customers. The association argued that without a mandatory limit, large and powerful merchants will continue to apply high surcharges that smaller merchants may follow.
How did the rules on surcharging change in 2003 and why does that matter today?
In 2003 the Reserve Bank lifted restrictions to allow merchants to surcharge MasterCard and Visa credit card systems so merchants could avoid spreading card acceptance costs across all customers. The change matters because there’s now concern some merchants may be using surcharging to generate extra revenue rather than just cover card costs, prompting the current review.
Is there evidence consumers are paying surcharges frequently?
Yes. A 2010 Choice report referenced in the article found nearly 90% of respondents had paid a surcharge within the past year, which consumer groups use to argue that surcharging is widespread enough to warrant closer scrutiny.
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