Consumer watchdog, the Australian Competition and Consumer Commission (ACCC), has joined in the chorus calling for an overhaul of the card surcharge system in the country.
Last year, consumers reported almost 2500 businesses for allegedly imposing an illegal surcharge on transactions. Recent research carried out by Choice found that 66 per cent of people it surveyed reported that businesses often apply card surcharges without telling them.
The ACCC told the Reserve Bank of Australia (RBA) this week that “greater costs have fallen on the actors in the system with the least bargaining power – consumers and small business merchants” as a result of surcharging.
The ACCC argued that “the level of complexity of the retail payment system has led to poor outcomes”, and it did not have the resources to effectively deal with the volume of complaints, reported the Australian Financial Review.
Last October, the government announced $2.1 million new funding for ACCC to tackle excessive surcharges. The funding was aimed at enabling the consumer watchdog to crack down on illegal and unfair surcharging practices and increase compliance activities.
The ACCC has told the RBA that any reforms to the surcharging framework should be considered “holistically”.
“Consumers are experiencing detriment from the increased use of payment surcharges and there is a significant need to reform the system so that there are lower costs and less complexity,” said the ACCC in its submission.
“Any proposed reforms to merchant surcharging also need to be considered holistically and accompanied by complementary measures at other points in the retail payments system.”
According to the RBA, the rise in card use over the last two decades meant that the overall expense for merchants has reached $6.4 billion annually.
The ACCC also criticised “blended” pricing – a flat fee structure that does not differentiate pricing on whether a credit or debit card is being used – because it means consumers using a lower-cost payment method such as debit are cross-subsidising others using a higher-cost credit method.
It said small businesses were disadvantaged and paid far more for card acceptance than bigger players.
Backing calls for reforming the card surcharge system – one that is already outlawed in countries such as the UK and those within the EU – are big banks which are often the target of public ire over this practice.
On Thursday, Commonwealth Bank urged the RBA to scrap surcharges on debit and credit card payments.
Backing those calls are payment giants such as Mastercard and Visa. Mastercard Australasia president Richard Wormald warned a ban on debit but not credit card payments only would “disadvantage particularly less affluent consumers who are using credit as a cash flow management tool to manage their budget.”
The government has already indicated its willingness to end surcharges on all debit purchases from next year, on the basis of the outcome of the RBA review.