Retailers defend credit cards surcharge

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.