New credit card surcharge rules

Do you operate a business? Do you have a surcharge for credit card payments?

After 1 September 2016, you may not be able to implement those surcharges anymore.

Last week, the Australian Competition and Consumer Commission announced it would use its new powers to crack down on unnecessarily high surcharges which exploit consumers.

Now, the ACCC says businesses can only charge the actual cost of the customer using that debt or credit card.

“They can’t charge excessively, they can just charge the cost, which is really just the cost of the terminal and the charge that the bank charges them for using the credit card,” ACCC executive chairman Rod Sims told the ABC.

These changes affect millions of Australian small businesses

What’s going on?

Back in February, an amendment to existing competition and consumer law was passed which included excessive credit card surcharges.

Then, in the last week of May, the Reserve Bank of Australia released the findings of its “Review of Card Payments Regulation” report.

It’s a huge paper, with many findings. But there are three main changes:

  1. The definition of “card acceptance costs” will be limited.
    These costs will be categorised as the fees paid to a merchant’s acquirer, or other payment facilitator, and certain costs paid to third parties in order to accept other types of cards.
  2. Payment facilitators need to provide merchants with an annual statement.
    That statement needs to include the average cost of acceptance for each of the card payment systems regulated by the RBA. These costs will be published in percentage terms, rather than a fixed amount, which means some industries with higher surcharges – such as the airline industry – will probably drop their surcharges as a result.
  3. The ACCC now has investigation and enforcement powers over cases involving excessive surcharging.

I’m a business, and I charge customers for using credit cards. Do I have to change my fees?

While the RBA now says businesses can only charge customers what they are being charged themselves, many business owners might say they only have a vague idea of those costs. That’s why the RBA has said every payments facilitator needs to present a statement to their merchants about how much those costs are.

That way, no one’s guessing.

How much will those charges will be?

There’s no specific outline yet because these costs aren’t known or published for a lot of industries. But the RBA has given some guidance by saying no surcharge should exceed the RBA standard.

As a guide, MasterCard and Visa Debt costs are about 0.5 percent of the transaction value, while MasterCard and Visa credit cost about 1 percent to 1.5 percent. American Express payments can cost anywhere between 2 and 3 percent.

But these costs can change – which is exactly why every merchant will be given a statement.

Can I get rid of my surcharges but replace them with something else?

No, but you can still keep other charges like booking fees or service fees. The rules only apply to payment-processing charges.

What else do I need to know?

Businesses often just charge all credit cards at the same rate as a catch-all. You can still do that under the new rules, but you’ll have to set the surcharge at the lowest cost of any of the cards you accept.

When is this all starting?

For larger businesses, which are classified as those with gross revenue of $25 million or employing at least 50 employees, these changes start on 1 September 2016.

For everyone else, the changes start on 1 September 2017, so you’ve got some time to prepare.

In the meantime, you can read more about what the ACCC had to say about the changes here.

NAB Fee cuts – there’s more to it

National Australia Bank’s recent fee cuts have received much positive media attention yet the moves mask a deeper strategy by the bank to access cheaper funding lines.
The media has generally portrayed the move as having the aim of keeping existing customers happy whereas it was more likely done as a move to attract new deposit customers.
NAB has performed the worst of the Big Four in attracting retail deposits throughout the rush into deposits sparked by the financial crisis. Even though NAB increased retail deposits by $13 billion to $56 billion from mid-2007 to August 2009 this was well below the  performance of its peers.

NAB’s banking rivals attracted somewhere in the range of $11 billion and $22 billion more of cheaper funding during the recent crisis, leaving NAB now scrambling for market share.It is easly to conclude that NAB’s latest round of fee cuts appear more like a desperate attempt to claw back some of the ground it has lost recently.

The move by NAB is set to cost the bank over $100 million a year.

But if it succeeds in boosting deposit levels, it will prove a cunning move.

If NAB can increase deposits quickly, it will provide a funding source for a potential spike in residential lending, as the newly acquired mortgage broker army from Challenger begins writing the bank’s loans.

The strategy at NAB seems to be a case of giving with one hand and while taking back with the other.

Thanks to for the bringing this to our attention

ASIC releases financial hardship report

ASIC, in conjunction with Consumer Affairs Victoria (CAV), has released a report examining how lenders and mortgage brokers respond to borrowers experiencing financial difficulties.

The report, Helping home borrowers in financial hardship (REP 152), found that while some lenders are responding well to the needs of their customers, there is generally room for improvement and provides guidance to industry on how to improve practices.

‘This report highlights the importance of industry taking an active role in dealing with hardship’, said ASIC’s Senior Executive Leader, Deposit Takers, Credit and Insurance Providers, Mr Greg Kirk.

‘With forecasts of growing unemployment, we can expect to see increasing numbers of borrowers experiencing mortgage stress. In many cases, however, financial difficulties will be temporary, allowing problems that arise to be resolved.’

‘It’s important that lenders and intermediaries have processes and procedures in place to provide constructive responses to financial hardship. These include procedures to identify customers in hardship, to provide clear and timely information to customers on their right to seek relief, and to engage sufficiently with a customer’s circumstances in order to provide appropriate and flexible assistance’, said Mr Kirk.

The report found that:

  • Information about financial hardship is usually only provided following payment default, making it very difficult for borrowers to take positive action at an early stage. Equally concerning, this information is often insufficient for borrowers to understand their options and make informed choices;
  • Some lenders do very little to identify borrowers who may require hardship assistance. Many lenders leave this identification of need to collection officers who may not be trained for the purpose eg. one lender only identifies hardship where the borrower raises the need for assistance themselves;
  • Lenders appear to prefer offering short-term assistance, such as a three month payment moratorium, rather than genuinely engaging with, and responding to, a borrower’s specific situation. For example, a home loan borrower who has lost income through reduced overtime may need their loan to be extended with lower repayments over a longer period. In such circumstances, a short moratorium is a very temporary fix leaving the borrower likely to default when repayments resume;
  • Some lenders have adopted policies that are inconsistent with the rights and remedies available to borrowers under the Uniform Consumer Credit Code. For example, by refusing hardship assistance once payments are more than 60 days overdue or limiting any variation in repayments to a maximum period of six months; and
  • Despite clear industry standards mortgage brokers generally have a limited understanding of their role in responding to financial hardship. While most brokers say they offer assistance, there is little evidence of formal policies and procedures to ensure it is done effectively or constructively.

‘This report examined industry practices as at late 2008 and there are already moves within some sectors to improve. On 5 April 2009, the Federal Treasurer announced an agreement with the four major banks wherein they commit to assist borrowers who are experiencing financial difficulty as a result of the global recession’, Mr Kirk said.

‘ASIC is confident industry will welcome the guidance provided by the report, and we’ll continue to work with them to promote better outcomes for borrowers.’

Helping home borrowers in financial hardship’ also provides guidance for borrowers. Further information for borrowers is also available on ASIC’s consumer website, FIDO, at

Victorian borrowers are also encouraged to visit the Consumer Affairs Victoria website ( for publications that can assist them in dealing with their credit providers. These publications explain the rights and responsibilities of both lenders and borrowers in Victoria.