Are you being overcharged every time at checkouts? This ‘loophole’ is costing Aussies a fortune!
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In an age where tapping a card has become second nature, many Australians unknowingly pay a premium every time they make a purchase.
A 'loophole' in the current system allows businesses to impose surcharges on debit and credit card transactions at the checkout, and it's hitting consumers hard in the wallet.
Under the Australian Consumer Law and the Competition and Consumer Act, businesses are not prohibited from applying these surcharges to electronic payments. This is true even for establishments that have opted to go cashless.
What's more, there's no legal obligation for businesses to provide a fee-free payment option at the checkout.
This oversight in the system is proving costly for Australians, with estimates suggesting that card surcharges could be draining up to $4 billion annually from consumers' pockets.
The issue has caught the attention of Bennelong MP Jerome Laxale, who advocated for 'urgent reform' to the surcharge system.
‘Whether or not a business applies a surcharge is up to them, but this loophole furthers my call to have a fee-free digital option available for merchants and consumers,’ Laxale said.
‘The system that’s in place for 20 years doesn’t make sense in 2024.’
The debate over surcharges was brought into sharp focus when Laxale questioned Commonwealth Bank Chief Executive Matt Comyn during a House of Representatives economics committee meeting.
The MP highlighted the discrepancy in costs when a cup of coffee priced at $5 in cash incurs an additional surcharge, making it $5.08 when paid for by card.
Comyn responded by explaining that costs are 'embedded for cash but not embedded for digital' due to the mechanisms governing electronic payments.
Despite this, consumer law dictates that businesses can go card-only and apply a surcharge, provided they are transparent about the payment methods they accept and the total minimum price payable.
The Australian Competition and Consumer Commission (ACCC) further stipulated that a surcharge must not exceed the cost of using that payment type and that businesses must be able to justify the surcharge.
If no fee-free option is available, businesses are required to include the ‘minimum surcharge payable in the displayed price for its products or services’.
This means that the price of a coffee at a card-only café should be advertised as $5.08, ensuring that consumers are not misled about pricing.
‘Under the Australian Consumer Law, all businesses must display clear and accurate prices and must not mislead consumers about their prices,’ the ACCC spokesperson said.
Interestingly, while the Australian rental sector, governed by state laws, offers protections against surcharges by ensuring at least one fee-free payment option, the retail sector does not have similar safeguards.
Laxale has called on the Reserve Bank of Australia, which enforces surcharging rules alongside the ACCC, to reform the system and introduce a fee-free option for retailers.
‘My advice to the RBA was that they’ve got the public on their side on this,’ he said.
‘They need to be bold and do what others around the world are doing and ensure that, at the checkout, there’s fairness for small businesses and customers.’
Have you noticed these surcharges affecting your budget? What are your thoughts on the need for a fee-free payment option? Share your experiences and opinions in the comments below!
A 'loophole' in the current system allows businesses to impose surcharges on debit and credit card transactions at the checkout, and it's hitting consumers hard in the wallet.
Under the Australian Consumer Law and the Competition and Consumer Act, businesses are not prohibited from applying these surcharges to electronic payments. This is true even for establishments that have opted to go cashless.
What's more, there's no legal obligation for businesses to provide a fee-free payment option at the checkout.
A ‘loophole’ in paying cards at checkouts costs Aussies a fortune. Credit: Shutterstock
This oversight in the system is proving costly for Australians, with estimates suggesting that card surcharges could be draining up to $4 billion annually from consumers' pockets.
The issue has caught the attention of Bennelong MP Jerome Laxale, who advocated for 'urgent reform' to the surcharge system.
‘Whether or not a business applies a surcharge is up to them, but this loophole furthers my call to have a fee-free digital option available for merchants and consumers,’ Laxale said.
‘The system that’s in place for 20 years doesn’t make sense in 2024.’
The debate over surcharges was brought into sharp focus when Laxale questioned Commonwealth Bank Chief Executive Matt Comyn during a House of Representatives economics committee meeting.
The MP highlighted the discrepancy in costs when a cup of coffee priced at $5 in cash incurs an additional surcharge, making it $5.08 when paid for by card.
Comyn responded by explaining that costs are 'embedded for cash but not embedded for digital' due to the mechanisms governing electronic payments.
Despite this, consumer law dictates that businesses can go card-only and apply a surcharge, provided they are transparent about the payment methods they accept and the total minimum price payable.
The Australian Competition and Consumer Commission (ACCC) further stipulated that a surcharge must not exceed the cost of using that payment type and that businesses must be able to justify the surcharge.
If no fee-free option is available, businesses are required to include the ‘minimum surcharge payable in the displayed price for its products or services’.
This means that the price of a coffee at a card-only café should be advertised as $5.08, ensuring that consumers are not misled about pricing.
‘Under the Australian Consumer Law, all businesses must display clear and accurate prices and must not mislead consumers about their prices,’ the ACCC spokesperson said.
Interestingly, while the Australian rental sector, governed by state laws, offers protections against surcharges by ensuring at least one fee-free payment option, the retail sector does not have similar safeguards.
Laxale has called on the Reserve Bank of Australia, which enforces surcharging rules alongside the ACCC, to reform the system and introduce a fee-free option for retailers.
‘My advice to the RBA was that they’ve got the public on their side on this,’ he said.
‘They need to be bold and do what others around the world are doing and ensure that, at the checkout, there’s fairness for small businesses and customers.’
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