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Crackdown on card fee gouging

The Turnbull government has put retailers, banks and the big credit-card schemes on notice that it will no longer tolerate excessive surcharging of customers who pay with a Visa, Mastercard or AMEX card.

Even though the average cost borne by retailers for credit card payments is around 0.3 per cent of the value of consumer purchases, many companies levy surcharges of as much as 10 per cent on credit-card holders.

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Treasurer Scott Morrison said on Tuesday: “We will legislate to ban merchants from imposing unfair card surcharges that are greater than the cost to them of accepting payment by card.”

“It will have to pass the fair dinkum test – it has to be about the fair dinkum cost of what someone is actually absorbing and passing on,” he said.

The new legislation, due to be introduced to federal parliament by the middle of next year, will give the Australian Consumer and Competition Commission additional powers to take action against retailers that charge excessive fees.

New laws to complement Reserve Bank reforms

The Reserve Bank is already reviewing the fee arrangements on credit card transactions, with an announcement of reforms expected before the end of this year.

The New Daily understands that the RBA will reduce the so-called “merchant service fees” that banks levy on retailers.

This should make it cheaper for most retailers to accept credit card payments and finally compel service providers such as airlines and ticket booking agencies from imposing surcharges of more than 5 per cent.

However, if these industries try to bypass the RBA’s reforms, their actions are likely to be illegal under the new laws flagged by Mr Morrison.

The government legislation might also force large taxi companies to lower surcharges.

Taxi regulators in Victoria and New South Wales recently forced taxi providers to reduce surcharges on credit card payments to 5 per cent from 10 per cent.

Murray inquiry drives reforms

The regulatory crackdown on credit card fees has gathered momentum in the last year since the Murray Inquiry called for greater transparency in the Australian payments system.

The Murray Inquiry was particularly concerned that consumers using low-cost forms of payment such as debit cards were often copping the same surcharges levied on credit card users.

Mr Murray and other members of the inquiry urged regulators to ensure that the higher costs of processing credit card transactions were not cross-subsidised by debit card users.

Consumer groups have expressed concerns that airlines might simply increase the airfares as a way of making up revenue lost from the new ban on punitive surcharges.

For more information about how credit-card users are getting ripped off, read The New Daily’s story from August 5 here.

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