Credit card surcharges under spotlight with Small Business Minister urging watchdogs to act

Credit card surcharges are under the spotlight with competition and market watchdogs urged to respond to consumer issues.

Surcharges apply to some purchases to cover credit card or other processing fees, but the government has urged companies to be transparent about the source of the additional costs.

A survey of consumer frustrations was released with the Commonwealth Consumer Affairs Advisory Council’s report on credit card surcharges and non-transparent transaction fees yesterday.

Small Business Minister Bruce Billson has referred the report to the Australian Competition and Consumer Commission, and the Australian Securities and Investments Commission.

He said both agencies had powers to follow up on fees but there was some confusion over which agency should respond.

“Officials were discussing the matter before my eyes,” he told SmartCompany today, and said he expected a new protocol to clear up responsibilities as soon as possible.

“The government is strongly encouraging businesses to adopt the better practice principles that this report has identified to improve consumers’ experiences when making transactions,” said Billson in a press release.

The Australian Consumer Law and guidelines from the Reserve Bank of Australia are considered adequate to police surcharges, and Billson has mentioned rules on misleading conduct could apply to surcharges.

An ACCC spokeswoman said the watchdog is “currently considering” whether some fees and charges are adequately disclosed, and said “issues of concern” were identified in the travel and entertainment industries.

“This assessment will have close regard to the general provisions that prohibit misleading or deceptive conduct or false representations, as well as more specific ACL provisions.”

ASIC made no comment when asked what their course of action would be in response to the report.

Consumer advocate CHOICE estimates the average merchant service fee for Mastercard or Visa to be about 0.86%.

A survey included in the report of consumer frustrations with credit card surcharges stated 43% of respondents said they were slugged fees above 2.5% of the purchased item’s value and 41% were sometimes slugged.

The “most common” complaint according to the survey was an $8.50 surcharge on an airline ticket applied per leg of a journey. In some cases surcharges amounted to $17 on a $49 flight.

Nearly 85% of respondents or 7600 people said airlines charge the most in fees and surcharges.

The advisory council made seven findings and five recommendations.

“CCAAC is of the view that there may be a role for public enforcement action where card scheme rules and their enforcement mechanisms are insufficient to restrict surcharges and fees that are applied in a manner that causes consumer harm,” the report stated.  

“While penalties for excessive surcharging can be built into contractual arrangements with merchants, the commercial nature of the relationship appears to create a disincentive to card scheme participants imposing penalties against merchants who are in fact their own customers.”

CHOICE has run a campaign to have surcharges reigned in, targeting airlines Virgin, Tiger, Qantas, Jetstar and taxi facilitator Cabcharge.

Jetstar declined to comment.