Small business owners have been warned that they must be able to prove card surcharges are not excessive, or face the wrath of a cashed-up regulator.
The crackdown is part of a two-pronged approach to reduce the cost of card payments for both consumers and small businesses, which includes a proposal to ban fees on debit card transactions by the start of 2026.
As consumers have drastically cut cash use in recent years, the costs associated with both making and accepting card payments have become a hot topic in the cost-of-living debate. While the cost of individual transactions has declined, the overall costs - both for businesses to process card payments and for consumers to use their cards - have surged because of large increases in the frequency of card use.
It's estimated Australian consumers pay about $1 billion a year in card surcharges, while merchants fork out around $6.4 billion to Payment Service Providers (PSPs) to process these card payments and supply hardware (such as card terminals).
The Reserve Bank, the body responsible for regulating the card payments system, is currently conducting a Review of Merchant Card Payment Costs and Surcharging, with the aim of minimising fees and increasing transparency and fairness for both consumers and small businesses. Options on the table include banning all surcharges on debit and credit cards, which would bring Australia into line with the United Kingdom, but may push more costs back on to merchants.
According to an RBA Issues Paper released at the end of last year, problems under the current card system include:
While the RBA review is ongoing, consumer watchdog, the Australian Competition and Consumer Commission (ACCC), has announced excessive card surcharges levied by businesses will be an enforcement priority in 2025.
Speaking in February, ACCC chair Gina Cass-Gottlieb, said the agency had received $2.1 million in funding earmarked to ensure businesses, both large and small, were applying surcharges fairly.
The crackdown was prompted by a growing number of complaints as card usage escalated, with Ms Cass-Gottlieb reminding business owners surcharges should be clearly disclosed before sale and could not be more than the actual cost to the business of accepting the card payment.
"These were repetitive instances. It looked like the coffee was $5, but then there's an additional 50 cents, so $5.50. That matters." she said.
Businesses that breach surcharge regulations can be hit with infringement notices with penalties of up to $126,000. In more serious cases the ACCC can take court action to seek pecuniary penalties of more than $1.3 million.
Some key guidelines for business owners to bear in mind were:
While an excessive surcharge may only be a matter of a few cents on each transaction, as with the Fitness First case above, it can add up and still attracts the attention of regulators. Other cases in which the ACCC has taken action on for excessive surcharges include cases against Nine Entertainment, Europcar, Red Balloon, Cruisin Motorhomes and Lloyds Auctioneers and Valuers.
One area of particular concern, highlighted in recent news stories is that, under current regulation, businesses can be penalised for charging consumers more than the actual cost of processing a transaction, but the ACCC does not have the power to act against PSPs who levy excessive surcharges against merchants who bundle credit and debit charges together and charge the same fee to businesses for processing both.
The RBA is expected to report back later this year on the outcome of a review into the surcharging framework with any changes expected to be enacted by 2026.
For more information on card surcharge rules, view the ACCC guide.
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