Earlier this year, the Australian Competition and Consumer Commission (ACCC) set its sights on a new enforcement priority for the 2025/2026 financial year as part of its ongoing efforts to protect consumer rights: cracking down on misleading surcharging practices and hidden add-on costs by businesses.
Now, the ACCC has issued a timely reminder to businesses to review their card payment surcharges and pricing practices to ensure they are compliant.
Card surchargers
In today’s market, businesses often incur costs for processing card payments, such as additional fees and charges imposed by banks and payment processors.
While it is acceptable for businesses to pass these costs on to customers as a surcharge, it is crucial for businesses to ensure that surcharges imposed on payments made via Eftpos, MasterCard and Visa are adequately disclosed and are not “excessive”.
Excessive surcharges
The Competition and Consumer Act 2010 (Cth) (Act) prohibits businesses from charging “excessive surcharges” – but what is classified as an “excessive surcharge”?
Excessive surcharges are fees imposed by businesses that exceed the actual cost to them for accepting a specific card payment from a customer. To be compliant, businesses must ensure that any surcharge they impose on customers does not exceed the cost of acceptance for the specific card type.
The cost of acceptance is the average cost per card transaction over a twelve-month period for a specific card payment. To note is that the cost of acceptance is based on the individual card type, meaning that businesses must calculate the cost of acceptance separately for each card type it accepts.
The Reserve Bank Standard No.3 of 2016 sets out what fees and charges businesses can include when calculating their cost of acceptance, these may include:
- merchant service fees;
- terminal fees; and
- to the extent they are directly related to a particular card type:
- gateway fees paid to a payment service provider;
- fraud prevention costs paid to an external provider; and
- terminal costs paid to a provider other than the business’s bank or payment processor.
Businesses must be able to substantiate the fees and charges on which their surcharges are based and should be prepared to show documentation that verifies the fees and charges.
From a practical perspective, it is likely that each card type will have a different cost of acceptance to a business. As such, if businesses want to streamline their surcharges by applying a uniform rate across all card types, the surcharge must not be higher than the lowest cost of acceptance. It is not permissible to average out the costs for different card types when setting a uniform surcharge.
Hidden add-on costs
The Australian Consumer Law prohibits businesses from engaging in pricing practices that result in hidden add-on costs revealed to customers after the customer has begun the purchasing process.
Hidden add-on costs refer to any additional fees or charges that are not disclosed to customers upfront (such as card payment surcharges), leading to unexpected costs to customers at the end of the transaction.
Businesses must provide customers with clear and accurate pricing information upfront, which includes displaying the total costs for goods and services, and any surcharges that apply. This is to ensure that customers are fully aware of the complete cost of the transaction at the beginning.
ACCC Enforcement Action
As an enforcement priority for the 2025-26 financial year, we anticipate that the ACCC will actively monitor business compliance and may take enforcement action where businesses are found to have charged excessive surcharges or failed to disclose surcharges upfront. Enforcement action may include issuing infringement notices, commencing court proceedings seeking substantial penalties, and/or issuing public warning to inform the public about non-compliant businesses.
Watch this space!
What Businesses Should Do
With the ACCC keeping a close watch on excessive surcharges, it is time to act by:
- Reviewing your surcharges: conduct a thorough review of your card payment surcharges to ensure they are reasonable and reflect the actual cost of acceptance. This involves calculating the cost of acceptance based on payment processing information, contracts, statements, or invoices from your payment providers. Regular reviews can help ensure ongoing compliance and avoid potential penalties; and
- Being transparent: ensure you are clearly disclosing any card payment surcharges to customers upfront. This means including surcharge information in all pricing displays, whether online or in-store, and ensuring that customers are aware of these fees at the beginning of their purchase process.
How We Can Help
Contact Baybridge on [email protected] or on 02 9232 3511 for your legal requirements.
