Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

The response to the government's plan to curb excessive credit card fees has been broad, considered and overwhelmingly positive. I would like to spend some time going through some of the commentary that followed the Prime Minister's announcement last October that the government would act on disproportionate card surcharges.

Under the headline 'Plan to rein in excessive surcharges on plan payments,' John Collett in Fairfax pointed to widespread community frustration at the current free-for-all fees regime. On 25 October last year, he wrote:

It's a common trap. Consumers are seduced by the headline price of an airfare or concert ticket only to find themselves slugged with a hefty booking fee for the privilege of paying with a credit or debit card.

The price of convenience is an astonishing $1.6 billion a year. That's how much Australians pay in surcharges for card payments, according to a survey commissioned by MasterCard last year.

If you think it's too much, you are not alone. Consumer organisation Choice has been railing against excessive surcharging for years, while a Change.org petition calling on Jetstar to drop its surcharge of $17 for a return fare has collected about 110,000 signatures so far. Now we might finally see some action—

John Collett writes—

The Turnbull government, as part of a broader response to an inquiry into the financial system, announced last week it would crack down on excessive surcharges. The government announced it would legislate a ban on surcharges that exceed the "reasonable costs" faced by merchants in accepting cards. The move is likely to have bipartisan support so it's going to happen, it's a question of when, and what it will mean in practice. No one disputes that there is some cost to the merchant of accepting cards, the question is what is the "reasonable cost"? Choice has estimated that MasterCard or Visa transactions cost about 1 per cent of the transaction total to process while Amex and Diners Club are more expensive, up to 2 per cent.

He continues:

Choice has described Qantas and its low-cost offshoot, Jetstar and Cabcharge as among the worst offenders in excessive surcharging of their customers.

I will deal with the question of reasonable cost later in this debate, but Collett goes on to detail in his article some of those excessive costs:

Virgin Australia charges $7.70 a ticket whether paid by credit card, debit card or PayPal. The surcharge can amount to about 8 per cent on top of the typical cost of a Sydney to Melbourne flight. Qantas charges $2.50 for payment for domestic tickets, which includes New Zealand, paid by debit card. It charges $7 for domestic tickets paid by credit card. For international tickets, the surcharge is $30 by credit card and $10 by debit card.

Other media outlets have mirrored the positive line taken by Fairfax. On 20 October, under the headline 'Turnbull government to crack down on excessive credit card surcharges', online newspaper The Guardian wrote:

The government has agreed to take action to improve fee and surcharging arrangements for credit card transactions, which could reduce the costs faced by consumers when they buy products at shops and restaurants.

Also on 20 October, under the headline 'Prime Minister Malcolm Turnbull declares an end to credit card gouging', News.com wrote:

One of the most frustrating shopping experiences will soon be a thing of the past, as the Australian Government flags an end to unfair credit card surcharges. Prime Minister Malcolm Turnbull has declared that the fee charged at the cash register for using a credit card must be no more than the merchant's cost of processing the transaction—typically a mere 0.5 per cent. Many retailers charge at least double this amount, and in extreme cases the surcharge can be as much as 20 times higher, in a practice that has infuriated customers. Treasurer Scott Morrison said that credit card surcharges 'have to pass the fair dinkum test'.

The fact that the media was virtually 100 per cent behind the government's actions is a sign that something desperately needed to be done to curb credit card fee gouging.

The survey referred to earlier was initiated by Klaus Bartosch and, as of late last night, it had collected 110,855 signatures. That, and responses to David Murray's financial system inquiry report, where 5,000 of the 6,500 submissions referred to the surcharge, signal a win for people power and the collective will over dodgy business practices.

While this legislation sets out to put an end to fee gouging, the government acknowledges the need for businesses to recoup fees accrued from customer credit card payments. If, like me, you thought credit card surcharges had been around forever, then think again. As a point of history, it is interesting to note that credit card surcharges were only introduced in Australia back in 2004. An article in online news magazine The Conversation said that, in 2003, the Reserve Bank of Australia introduced a series of payment system reforms, including the elimination of the pre-existing no-surcharge rules. This meant retailers could recover the cost of accepting a credit card from a customer who chose to use the card. What the Reserve Bank failed to do was limit the size of the surcharge the retailer could set. Not surprisingly, given the success of surcharges in Australia, the RBA rules have been followed all around the world.

The Conversation makes a strong case for the retention of credit card surcharges but at a rate commensurate with the cost to the retailer of taking the credit card payment. Credit cards, it says, are relatively expensive payment tools compared to other card forms such as debit cards and, of course, cash. Under a no-surcharge rule, it follows that there would be excessive use of credit cards because of their popularity with consumers because they are very easy to use. It makes sense that customers would choose to use a credit card, because the cost would be shared at the price-point by people who pay cash or use debit cards. This excessive use would further jack-up costs for businesses, which in turn would be passed on to consumers. It is a vicious retail circle. While this shared cost would benefit the credit card user, it would be patently unfair for other, non-credit card, consumers.

Surcharging changes this by levying a fee on the credit card user rather than unfairly spreading it to all customers. But, as is now clear, it is the level of the fee that has become of such concern for potentially millions of Australians who make purchases with their credit cards. The Murray inquiry's recommendation was simple and succinct. Recommendation 17 said government should:

Improve surcharging regulation by expanding its application and ensuring customers using lower-cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging'.

In other words, we should protect the credit card user from businesses that take too large a cut from the credit card transaction while also protecting the consumer who does not pay by credit card.

And this is exactly the balance the government has sought in the legislation that we are debating today. The Competition and Consumer Amendment (Payment Surcharges) Bill was introduced by the Assistant Treasurer during 2015's final parliamentary sitting, with the very clear objective of limiting surcharges to no more than cost recovery or the cost to the business of the transaction fee.

Contained within the second reading speech was an extraordinary set of figures, and I would like to share them with you. Each month around $45 billion in purchases are processed in Australia through more than half a billion card transactions. It does not take much imagination to realise the possible scope of savings through shutting down what the Assistant Treasurer referred to as the 'widespread problem of excessive surcharging'. This measure, in other words, will provide considerable savings overall to Australian consumers.

The laws will be given enforcement muscle through the Australian Competition and Consumer Commission being responsible for enforcing this ban to ensure that consumers are treated fairly. The Reserve Bank of Australia will play a key role in setting the costs a merchant is permitted to recover by surcharging. A few problem industries, such as ticketing, airline and travel industries, have created most of the consumer complaints and distorted price signals in the payments system. The enforcement muscle comes in the form of heavy fines to businesses that seek to profit from consumers who pay with credit cards.

The ACCC will be able to require merchants and other payment system participants to provide documents or information to help it assess the costs incurred against any surcharges imposed by the merchant. It will be an offence to fail to provide the documents or information requested by the ACCC. If the ACCC forms the view that a merchant has engaged in excessive surcharging, it may issue an infringement notice, including a penalty for listed corporations of up to 600 penalty units, currently $108,000, for each alleged contravention.

This bill will sit alongside other existing legislation designed to protect consumers from dodgy business practices. Australian consumer law requires that pricing is communicated to consumers in a manner that is not misleading or deceptive and that allows businesses to compete on a level playing field. The ACL states that prices presented to customers must state the total price of the good or service as a single figure, with the total price to be displayed at least as prominently as any part price. This ensures that consumers can easily compare the prices of different goods and services.

'Drip pricing' occurs where a headline price is advertised at the beginning of an online purchase process and additional fees and charges, which may be unavoidable for consumers, are incrementally disclosed. On 17 November 2015, in action pursued by the ACCC, the Federal Court found that Jetstar and Virgin Australia had in some specific instances engaged in drip pricing through misleading and deceptive conduct and through making false or misleading representations about the price of particular advertised airfares. In October 2014, Ticketek and Ticketmaster adjusted their pricing practices in response to concerns raised by the ACCC regarding drip pricing. In April 2015, media reports suggested that Aldi had not adequately disclosed surcharges to customers at some stores despite adjusting their disclosure practice in August 2014 after concerns raised by ASIC in relation to their powers regarding misleading and deceptive conduct in the provision of financial services.

These are the practices the government hopes to stamp out with the passage of this bill. Addressing excessive card surcharging is a priority for the Turnbull government, and this is reflected in the speed with which these measures have come before parliament since the release of our response to the Financial System Inquiry. I commend the bill to the House.

Alex Hawke (Mitchell, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

I want to thank all members who have contributed to this debate in the parliament. It has been a good debate, and a constructive one. Each month, around $45 billion of purchases are processed through more than half a billion card transactions. There is no doubt that consumers and businesses are both better off because of the convenience, security and flexibility offered by cards and other alternative payment methods. This is not to say that merchants do not face additional costs in accepting certain types of payments. Recovering these costs is not unreasonable. Profiteering, however, while pretending to recover costs, is misleading and frustrating for consumers and undermines the efficient operation of the payment system as a whole.

Addressing excessive and unfair payment surcharging by merchants is an important part of the government's financial system agenda in response to the Financial System Inquiry chaired by David Murray AO. The inquiry highlighted that this is an important issue from both a consumer fairness and a system efficiency perspective. Surcharging of payments allows merchants to send a price signal about the relative costs of different payment methods. However, a surcharge is excessive when it is above the costs incurred by the merchant for accepting that payment. Excessive surcharges, sometimes up to 10 per cent or more, have generated substantial angst in the community.

This bill gives effect to the government's commitment to ban these excessive payment surcharges by merchants by amending the Competition and Consumer Act 2010. It also gives the Australian Competition and Consumer Commission the powers to enforce that ban with its usual suite of powers provided in the Competition and Consumer Act 2010. These excessive surcharges can give consumers a false impression that certain payment methods cost more than they actually do. The community raised concerns through the Financial System Inquiry that merchants are profiteering from excessive surcharges. As a result of the measures in this bill, the Australian Competition and Consumer Commission will be well placed to respond to excessive surcharges by merchants and protect the interests of customers.

As new, smart and innovative methods of payment are developed and rolled out in this digital age, the government wants to make sure that Australia has a system in place whereby it can compete on a level playing field. Innovations should not be subjected to inaccurate overstatements of their true costs to ordinary Australians through excessive surcharging. I commend this bill to the House.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The question is that the bill be now read a second time.

Question agreed to.

Bill read a second time.