From 1 October, Australian consumers will start saving an estimated $1.6 billion a year as the ban on card surcharges comes into effect. But for businesses, it’s not all good news.
The RBA found around 16% of companies were still charging for debit card purchases as of March this year, meaning many retailers, hospitality venues and service providers now face a real commercial challenge in adjusting to the lost revenue.
Lauren McKee, Practice Leader at commercial law firm LegalVision, says with limited time to prepare, businesses need to look well beyond simply switching off a surcharge fee at the checkout.
“Start by identifying everywhere a card surcharge appears, not just at the point of sale,” she said, noting payment terminals, online checkouts, booking platforms, invoices, menus, quotes, receipts and accounting systems may be affected.
Adjusting to lost revenue
Beyond the operational clean-up, Ms McKee says the real challenge businesses will face is adjusting to the lost revenue.
Businesses that have relied on surcharges to recover payment costs will need to decide whether to “absorb those costs, adjust base prices or renegotiate payment fees with their third-party payment processors.”
Ms McKee warns that continuing to surcharge after the deadline isn’t just a compliance risk; it’s a contractual one.
Businesses that keep charging extra fees could breach their merchant agreements, risking “disabled functionality, contract enforcement or loss of payment facilities” from their payment provider.
While the ACCC won’t be the one imposing the surcharge ban itself, Ms McKee notes it can still enforce consumer law if a business tries to “disguise a card surcharge as another fee, or misleads customers about prices.”
That distinction, between a legitimate price rise and a disguised surcharge, is where McKee says businesses need to tread carefully.
“Increasing base prices is generally lawful,” she says, as long as there was no promise not to increase prices in a certain period of time, and “provided they do not mislead customers and they display prices correctly.”
Transparency and communication
Ms McKee stresses that “transparency is critical” when it comes to price increases. Where a business may face legal risks is if they introduce fees that only apply to card-paying customers with vague labels like a “service fee” or “handling fee”.
Cafes, restaurants, online retailers and ticketing platforms are most exposed to reputational damage if customers perceive a price rise as simply the old surcharge in disguise.
Ms McKee says businesses should “communicate the change plainly… avoid blaming customers, using confusing fee labels or suggesting every price change is caused by the surcharge ban,” since “simple pricing usually builds more trust than technical explanations.”
