Karen McNamara (Dobell, Liberal Party) Share this | Hansard source

I rise to speak on the Competition and Consumer Amendment (Payment Surcharges) Bill 2015 and commend both the Treasurer and the Assistant Minister to the Treasurer for bringing this bill before the House. This is an important bill that will have a positive effect on Australian consumers on a daily basis. Prohibiting excessive and unfair payment surcharges by merchants is a good reform that has a practical and beneficial impact.

It is an unfortunate reality that some merchants have been unscrupulous in passing on unnecessary surcharges to consumers in the name of 'cost recovery'. Australia has seen exponential growth in the use of credit cards at the terminal and when shopping online. We are so accustomed to it that we really think nothing of it. Many Australian consumers now carry little or no cash; instead, choosing the ease and convenience of using their card to make purchases. This practice is only becoming more prevalent, as usage of ATMs has plummeted to an all-time low while EFTPOS transactions have more than doubled since 2009 and 'tap and go' is a popular convenience.

We are now seeing the technology for cardless withdrawals at ATMs and making payments using a smart phone. Consumers regularly encounter retailers applying surcharges if paying by card and displaying minimum transaction fees. The local takeaway store has the convenience of an EFTPOS machine, but there is that minimum spend of $10 for the privilege of using it—otherwise be prepared for an additional cost for your chips and gravy. A $4 cup of coffee conveniently paid for by a tap of plastic can add an extra 50 cents or even a dollar to the total. So a week's worth of coffee alone adds up. 'Tap and go' is a sneaky trap since consumers are often charged credit card fees, even if using a debit card, when they could possibly avoid the fee by inserting or swiping their card instead.

In 2010 the coalition made an election promise to conduct an examination of Australia's financial system and in 2013 the government established the Financial System Inquiry, which was asked to make recommendations that would create a financial system to support and meet Australia's economic needs as we continue to grow and evolve. The final report from the Financial System Inquiry was delivered to the government in November 2014, and in October 2015 the government provided its response to this report.

The government has used the report to set an agenda for improving our financial system across a range of areas. It was noted in the report the significant consumer concern for the imposition by merchants of payment surcharges that were considered excessive. In fact, there were over 5000 submissions to the inquiry in this regard, and many of these submissions called for surcharges to be banned. Some industry submissions noted the important role surcharging could play in accurately reflecting the cost faced by merchants in accepting certain high-cost payment methods. In the inquiry's final report a recommendation was made to improve interchange fee regulation by clarifying thresholds for when they apply; by broadening the range of fees and payments they apply to; by lowering interchange fees. It further recommended an improvement in surcharge regulation by expanding its application and ensuring customers using lower cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging. The government has responded accordingly, stating in its response:

We will increase the efficiency of the payment system and ensure it achieves fairer outcomes for consumers, merchants and system providers by phasing in a legislated ban on excessive card surcharges.

The government agrees that it is necessary to take action to improve interchange fees and surcharging arrangements to achieve a more efficient system and to deliver fair outcomes.

The amendments contained in this bill will enhance transparency for consumers and improve price signals on payment method costs. Helping consumers to understand the costs of competing payment methods and encouraging the use of the most efficient methods of payment. In March 2015 the Payments System Board noted in its review of card payments regulation report that over the last two decades there has been a marked increase in the absolute and relative use of debit and credit charge cards in Australia. Overall the value of card transactions has grown at an annual rate 8.8 per cent since 2002. Card payments account for over 60 per cent of the number of non-cash payments in the economy. The report also noted that, despite modification of surcharging standards in March 2013 to address concerns about excessive and blended surcharging, excessive surcharging remains a concern for many stakeholders, citing the volume of submissions received by the Financial Systems Inquiry.

This bill amends the Competition and Consumers Act 2010 to prevent merchants from passing on excessive charges when the consumer opts to pay in a particular way. Importantly the changes do not prevent a merchant from levying a payment for the actual costs of processing a card payment; it simply prevents profiteering. Specifically, the bill defines a payment surcharge as an amount charged in addition to the price of goods or services for processing payment for the goods or services or an amount, however described, charged using one payment method rather than another. Currently excessive surcharging by merchants may be, and usually is, prevented under contractual arrangements between payment systems and merchants, but are not banned by law. The Reserve Bank of Australia has sole responsibility for designing a particular payment system as being subject to RBA regulation and setting standards and rules for participation in the payment system. The RBA standards allow card payment systems to cover a range of aspects, including interchange fees and merchant card surcharge arrangements. Interchange fees exist in varying degree, depending on which financial institution the consumers and merchants are with. Interchange fees refer to the fee charged by the merchant's financial institution to receive the transfer of payment from the consumer's bank account. The difficulty with interchange rates, however, is that they vary across a number of categories. For example, charities do not pay interchange fees, whereas premium cards are an average of just under one per cent.

This new legislation will mean that excessive charging by merchants where the additional cost passed on is above the merchant's cost of acceptance of the payment method will be banned. The Australian Competition and Consumer Commission, the ACCC, will be the primary enforcement agency for compliance with this plan and should the ACCC determine a breach of regulation in relation to payment surcharges, it may issue an infringement notice penalty of up to 600 penalty units—that is, $108,000 for corporations. The ACCC will be empowered to request documents or other information from payment system participants in order to determine if they are compliant. The permitted surcharge will be set in most cases by the RBA. In cases where payment systems are not covered by the RBA standard, the permitted surcharge will be set in regulation.

The government recognises the ongoing technological evolution of cashless payments and therefore understands the need for maintaining flexibility in regulatory regimes, and the government will continue to monitor and remove any disincentives or discouragement's for commercial activity. As the assistant minister to the Treasurer noted in his second reading speech:

So, these new rules do not merely establish a 'best practice' framework, but contain real teeth to achieve targeted and meaningful behavioural change.

He also noted:

Each month around $45 billion of purchases are processed through more than half a billion card transactions.

According to the RBA's Payment Systems Board data, in the 2014-15 financial year approximately $1.9 billion was charged in merchant fees on Visa/MasterCard purchases and $926.5 million on American Express and Diner's Club purchases. That is a total cost of $2.826 billion in merchant fees for the 2014-15 financial year. To put this in perspective, that is an estimated average of $120 in merchant fees for every person in my electorate of Dobell every year—around $17.4 million in merchant fees just from the people of Dobell every year.

Surcharging is currently common and problematic, so any measures such as the amendments contained in this bill are going to make a hip-pocket difference to Australians. These amendments seek to improve efficiency and allow greater transparency for consumers in terms of knowing actual costs involved for various payment methods while still providing merchants the freedom to ensure they obtain appropriate cost recovery.

This legislation ensures that everyday Australian consumers are being fairly treated at the cash register and are not being taken advantage of. Some of the biggest complaints when it comes to merchant surcharges are in relation to airlines, taxis and entertainment ticket vendors. This legislation now closes the loophole for so-called transaction fees or administration fees to be loaded onto credit card payments by the merchant, instead restricting the charge to actual costs incurred. The amendments in this bill will ensure that excessive surcharging no longer occurs and that any merchants who continue to operate in this manner will be actively addressed by the ACCC. This bill's explanatory memorandum notes:

…if charges described as ‘booking’, ‘service’, or ‘transaction’ fees are in substance imposed as a result of the payment being made by card rather than an alternative payment method such as cash or direct debit … they are intended to be caught by the ban. If on the other hand, additional fees are applied equally regardless of payment method used, and do not purport to be for the purpose of compensating for the cost of payment acceptance, they are not properly ‘payment surcharges’ and are not intended to be caught. Uniform ‘add-on’ payments such as these will remain subject to other consumer protection action to the extent that they breach misleading and deceptive conduct or other consumer protection provisions …

The amendments proposed by this bill are fair and considered for both merchants and consumers. I thank the Treasurer and the Assistant Treasurer for their efforts in bringing this bill to the House following extensive research, consideration and consultation. I commend this bill to the House.

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