Fitness First pays $12,600 fine over excessive surcharge claims, after charging flat 50 cent rate on card payments

Fitness First Australia has paid a $12,600 penalty over concerns it had breached excessive payment surcharge provisions.

The Australian Competition and Consumer Commission (ACCC) issued the business with an infringement notice after investigating concerns it had imposed a 50 cent flat fee on memberships paid by credit and debit cards between December 2017 and April 5, 2018.

The ACCC alleged the surcharge was excessive under the Competition and Consumer Act 2010 as it equated to around 1.09% of the $46 fortnightly membership fee charged by Fitness First, above its cost of processing MasterCard debit payments, which was 0.81%.

“While there is nothing to prevent businesses from imposing flat fee surcharges if they wish, they must ensure the surcharge amount does not exceed their cost of acceptance for any given transaction,” ACCC deputy chair Mick Keogh said in a statement on Wednesday.

“Businesses charging excessive payment surcharges, intentionally or not, do so at the risk of breaching the Competition and Consumer Act. The onus is on businesses that choose to impose surcharges to get it right,” he said.

Fitness First, which operates 61 fitness clubs around Australia, said in a statement it has credited all members affected by the “incorrect” surcharges.

“The incorrect charges were discovered following the introduction of a new billing system,” Fitness First said in a statement provided to SmartCompany.

“The fixed ‘per transaction’ fee previously utilised by Fitness First for processing card payments had resulted in some members being undercharged and some members being overcharged.”

Fitness First said it did not profit “in aggregate” from the procedure, and a new system has now been implemented to ensure “accurate cost recovery” for specific card types.

The Fitness First infringement notice is the fourth time the ACCC has taken formal enforcement action against a business for excessive payment surcharges.

RedBalloon was slapped with four infringement notices in relation to excessive surcharging in late 2017, while Cruisin Motorhomes was also issued a notice in July.

CLA Trading, which trades as Europcar, is currently the subject of Federal Court proceedings where the ACCC is alleging customers were charged fees above the company’s costs.

Regulations to curb excessive credit card surcharges were introduced in 2016, leading to a flurry of complaints from consumers about the conduct of businesses.

ACCC’s “signal of intent”

Commercial lawyer Richard Prangell, director at Viridian Lawyers, says the ACCC is sending a signal of intent to businesses that it will actively pursue excessive surcharges.

“The ACCC are trying to make an example of a large business to clarify what they believe the law to be,” he tells SmartCompany.

Prangell believes it is ill-advised to charge a flat surcharge on card payments under the new regulations, but it remains difficult for small businesses in particular to properly comply with the changes.

“It is very difficult for small to medium businesses to comply in the way they’re supposed to,” he says.

“The easiest way to comply is not to charge those surcharges.”

In the first year after the regulations were introduced, the ACCC received 1,391 complaints about charges that were too high. In the next year, when small businesses were also subjected to the laws, that figure grew to 1,754 complaints.

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