Australian Retailers Association warns against regulation of credit card surcharges

The Australian Retailers Association says retailers should not lose their right to apply surcharges on credit card transactions, arguing the existing arrangements allow for an effective “users-pay” system, and moves by the Reserve Bank to regulate surcharging would leave other customers absorbing the increased cost of providing the service.

ARA executive director Russell Zimmerman says “good retailers understand that they must consider their customers’ experience when deciding whether or not to directly charge for credit card usage and the majority won’t overcharge or charge at all.”

The ARA, which together with the Australian Merchant Payments Forum is set to provide a submission to the Reserve Bank of Australia on the prospect of re-regulating credit card surcharging, says “retailing is driven by consumer demand”.

“If charges for using credit cards are deemed unacceptable by consumers this will affect the individual retailer’s bottom line,” Zimmerman told SmartCompany.

“Charging directly for credit card usage is also about customer choice because it creates a user-pay system instead of the merchant service fee being absorbed into the price of all goods, just like other operating costs.”

“Businesses who charge directly for credit card use must inform their customers that the credit card fee will apply and also disclose the amount as a dollar or a percentage before they enter into the transaction, giving consumers the ability to make an informed decision about the means of payment that represents the best value for them.”

The comments follow observations from the Reserve Bank that there were concerns some charges were “well in excess of card acceptance costs.” In some instances, surcharges can account for up to 4% of a transaction.

“There may be a case for varying the standards to allow the scheme to place some limits on the level of surcharges,” the central bank says.

Peter Strong, executive director of the Council of Small Business Organisations of Australia, says there’s no evidence that small business is ripping off customers.

“They should look at the big retailers, not the small ones,” Strong says.

But Paul Dowling, principal analyst at East & Partners, says merchants have become “more aggressive” and generated fees that are beyond the cost of recovery, sometimes by a factor of two.

“The principle of merchants being able to set their own surcharge rate is appropriate, but it doesn’t suit card companies, which have attributed it to depressed card usage,” Dowling says.

He adds that online merchants tend to have higher credit card surcharges than high street merchants, but by the time a customer finds out the exact fee, they are likely reluctant to stop the transaction.