Recent court proceedings by ACCC are a stark reminder to businesses that credit and debit card payment surcharges must be limited to the amount it costs to process the payment.

This decision is a warning to businesses that choose to impose surcharges. The onus is on them to get it right. A failure to comply with these laws may result in significant penalties.1  – Mick Keogh, ACCC Deputy Chair

The ACCC’s recent successful action2  against Europcar under the ban on excessive surcharges highlights the serious consequences of failing to comply with the ban, following several recent enforcement actions.

The Federal Court has ordered Europcar to pay $350,000 in penalties for charging its customers excessive credit and debit card payment surcharges in breach of the Competition and Consumer Act 2010 (Cth) (CCA).

Justice Davies found that Europcar’s surcharges contravened the ban on excessive surcharges under the CCA. In addition to the significant pecuniary penalty, Europcar was ordered to pay a $25,000 contribution towards the ACCC’s legal costs and to provide refunds to its affected customers.

The ban on excessive surcharging on card payments

The CCA states that a corporation must not, in trade or commerce, charge a payment surcharge that is excessive. This ban on excessive card payment surcharges took effect on 1 September 2016 for large businesses and 12 months later for all other businesses.

The purpose is to ensure that businesses can only pass on to customers what it costs them to process a credit or debit card payment. This is referred to as the ‘cost of acceptance’ and generally includes:

  • merchant service fees
  • rental and maintenance fees for card payment terminals, and
  • any other fees incurred by the business in processing card transaction, such as cross-border transaction fees, switching fees and fraud related chargeback fees.

A payment surcharge is excessive if it amounts to more than it actually costs the business to process the card payment – that is, more than the cost of acceptance. For example, if the cost of acceptance for Visa credit for a business is 1% of the transaction value, that business can only impose a surcharge of 1% on Visa credit card payments.

Payment methods covered by the ban include Visa and MasterCard credit and debit cards, EFTPOS and American Express companion cards (issued through an Australian financial service provider, rather than through American Express directly).

The ACCC is responsible for enforcing the ban and may under the CCA:

  1. issue an infringement notice with penalties of up to $12,600 (body corporate) or $126,000 (listed companies) or
  2. take court action against the offending corporation seeking pecuniary penalties of up to $1,358,910 per contravention.

Europcar’s excessive surcharges

In the Europcar proceedings, the ACCC alleged Europcar imposed excessive surcharges for payments received by:

  • Visa and MasterCard credit card and debit cards between 19 July 2017 and 31 August 2017, and
  • Visa and MasterCard debit cards between 1 September 2017 and 5 November 2017.

The ACCC alleged that the surcharges exceeded the figure Europcar was legally permitted to charge customers by 0.17 to 0.62 percentage points, depending on the card type and the date the surcharge was applied, despite Europcar being notified by its bank in July 2017 of the costs of card acceptance.

Europcar admitted that its conduct contravened the ban on excessive surcharges and agreed to the penalties proposed by the ACCC.

While the amount of each excessive surcharge was relatively small (averaging just over $1 per customer), Europcar’s excessive surcharges affected more than 63,000 customers – resulting in an estimated financial benefit to Europcar of $67,215. The penalty imposed by the Federal Court equates to more than five times the amount of the benefit obtained and highlights the serious consequences of failing to comply with the ban.

In deciding whether the pecuniary penalty proposed by the parties was appropriate, the Court referred to the deliberateness of Europcar’s contravening conduct, including that:

  • Europcar was aware that the relevant section of the CCA was coming into effect but did not take adequate steps to prepare its systems to ensure compliance, and
  • senior management knew that Europcar was charging excessive surcharges for debit card payments between 1 September 2017 and 5 November 2017.

The Court also referred to Europcar’s prior history of contravening the CCA and the primary purpose of civil pecuniary penalties, being ‘specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners’.3

What this means for your business

If your business imposes payment surcharges, it is important to remember:

  • that you are only permitted to pass on to customers what it actually costs you to process the payment type
  • that payment surcharges can be set as a flat or fixed fee, but must not exceed the cost of acceptance for any given transaction
  • that banks and payment facilitators are required to provide businesses with statements setting out the average cost of acceptance for each card
  • to monitor and adjust your surcharges so that they do not exceed the relevant card’s cost of acceptance
  • to keep a record and evidence of your costs relating to costs of acceptance
  • to retain key documents to substantiate the calculation of the average cost of acceptance in case the ACCC issues a surcharge information notice, and
  • that you must ensure that your customers are aware of any applicable surcharges.

1 ‘Europcar to pay $350,000 penalty for excessive card payment surcharges’ – ACCC Media Release 146/19, 14 August 2019

2 Australian Competition and Consumer Commission v CLA Trading Pty Ltd trading as Europcar [2019] FCA 1262

3 Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at 195