CTH Competition and Consumer Amendment (Payment Surcharges) Bill 2015

On 3 December 2015, Scott Morrison MP introduced the Competition and Consumer Amendment (Payment Surcharges) Bill 2015 into the House of Representatives. The Bill would, if enacted, establish a legislative and regulatory framework to ban surcharges imposed in respect of particular payment methods that exceed the cost of acceptance for those payment methods.

Background to the Bill

According to the Explanatory Memorandum, the Reserve Bank of Australia (RBA) has wide-ranging powers in the payments system as set out in section 10 of the Payment Systems (Regulation) Act 1998 (PSR Act). This includes the setting of a Reserve Bank standard on payment systems designated by the RBA for regulation. The RBA has designated the eftpos (debit and prepaid), MasterCard and Visa (credit, debit and prepaid) and American Express companion cards payment systems under the PSR Act.  The Reserve Bank standards apply to the designated payment systems and cover a range of aspects including interchange fees and merchants’ card surcharge arrangements.  American Express and Diners Club have voluntarily undertaken not to prevent merchants from imposing charges on customers who pay with their cards.

The Reserve Bank standards allow card payment systems to limit a merchant’s surcharge to ‘the reasonable cost of acceptance’, which includes – but is not limited to – the merchant service fee that the merchant pays to its financial institution. Limits on surcharges are established by the rules of any card payment system that chooses to adopt them, though the Reserve Bank standards do not oblige the card payment systems to alter their rules to limit surcharges, or to enforce rules that are in place.

Throughout the Financial System Inquiry (the Inquiry), the community expressed significant concern that certain surcharges being imposed were at times far in excess of what could be fairly considered to be the costs to merchants of accepting cards. Most of the submissions called for surcharges to be banned. Some industry submissions noted the important role surcharging could play in accurately reflecting the costs faced by merchants in accepting certain high-cost payment methods.

The Government, in its response to the Inquiry’s recommendations on interchange fees and customer surcharging, agreed to take action to improve interchange fee and surcharging arrangements to achieve a more efficient system and deliver fairer outcomes for consumers, merchants and system providers.

Amendments Contained in the Bill

The amendments contained in the Bill will enhance transparency for consumers and improve price signals on payment method costs, helping consumers to understand the costs of competing payment methods and encouraging the use of the most efficient methods of payments.

Schedule 1 to the Bill amends the Competition and Consumer Act 2010 to establish a legislative and regulatory framework to ban surcharges imposed in respect of particular payment methods that exceed the cost of acceptance for those payment methods. The amendments will apply to excessive surcharges in respect of payments covered by a Reserve Bank standard or by regulations made for this purpose. Surcharges will be excessive where they exceed the permitted amount specified in the Reserve Bank standards or in the regulations. The amendments also ensure that the Australian Competition and Consumer Commission is the primary enforcement agency for the ban and that it has appropriate powers of enforcement.

The bill is awaiting second reading debate when Commonwealth Parliament resumes sitting in 2016.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Competition and Consumer Amendment (Payment Surcharges) Bill 2015 and Secondary materials as reproduced on TimeBase LawOne