The Balloon Has Popped - No More Excessive Surcharges

Red Balloon has had to pay $43,200.00 in penalties after the Australian Competition and Consumer Commission (“ACCC”) issued the first infringement notices for breaches of the new laws that ban excessive payment surcharges.

The ACCC alleged that Red Balloon charged consumers excessive payment surcharges on payments they made using Mastercard and Visa credit and debit cards.

Businesses are still allowed to charge a surcharge, however the new law is designed to ensure customers are charged no more than the actual cost to the business for using a particular payment method. Charging excessive surcharges for payments that are made using most credit cards and debit cards is now prohibited. Effectively the change in legislation bans businesses standing to gain extra profit depending on the type of payment method consumers use to pay for their goods or services.

Companies will only be able to charge approximately 0.5% for a debit card, 1-1.5% for a Visa or Mastercard and about 2-3% for most American Express cards. These are indicative figures given by the Reserve Bank as a guide. Actual costs might be higher for some businesses. BPAY, Paypal, Diners Club Cards and American Express cards issued directly by American Express, cash and cheques are not covered by the ban.

The ban on excessive surcharges was rolled out in two stages, the first for large merchants and the second for all other businesses. The ban commenced on 1 September 2016 for “large merchants”, and commenced on 1 September 2017 for all other businesses. Red Balloon is a “large merchant” which is a business that employs 50 or more people and has revenue greater than $25m and/or has assets greater than $12.5m.

Under the new legislation, the ACCC has the power to gather information and issue fines. The maximum penalties for each breach is about $75,600.00 for listed companies, $7,500.00 for other companies and $1,500.00 for other business operators. If each transaction is a breach, the penalties can be quite significant.

Red Balloon had to pay $43,200.00 for four alleged breaches and cooperated with the ACCC and has now lowered its payment surcharges to the correct amount.

The Government has warned this is only the beginning and more companies are expected to be issued with notices in the coming weeks.

Red Balloon was a warning for merchants. There is potential for this legislation to have a significant impact during the lead up to Christmas as the Government has warned that there will be an ACCC crack down on excessive surcharges.

Whether the surcharge is intentionally excessive or not is irrelevant and any businesses charging excessive surcharges on card transactions risks ACCC enforcement action.