Retail businesses are being advised to review their surcharge policies after vehicle rental giant Europcar was fined $350,000 for overcharging tens of thousands of customers.
The Federal Court ordered the company to pay the fine earlier this week after it admitted to charging Visa and MasterCard credit users more than $67,000 in excess surcharges in 2017.
Under a ban on excessive surcharges which came into effect in 2017, businesses are barred from charging card fees which exceed their costs for processing those payments.
More than 63,000 people were overcharged by Europcar to the tune of about $1 per customer on average, underlining the risk of even a small excess fee for businesses.
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“While the amount per customer was small, Europcar imposed these charges on thousands of consumer transactions which quickly added up to a considerable amount,” ACCC deputy chair Mick Keogh said in a statement circulated on Wednesday.
“This decision is a warning to businesses that choose to impose surcharges,” he said.
“The onus is on them to get it right. A failure to comply with these laws may result in significant penalties.”
The ACCC alleges Europcar was told by its bank, NAB, what its actual cost of accepting card payments was before much of the excessive charges were laid, but still continued to impose the fees on customers.
Europcar is not the first company to be caught in an excessive surcharge bind. Last year Fitness First paid a comparatively meagre $12,600 penalty for imposing a flat 50 cent surcharge rate on card payments, which resulted in overcharging.
Online experience platform RedBalloon has previously been caught in a similar situation and was slapped with four infringement notices in late-2017, while Cruisin Motorhomes was given a notice last July.
With the ACCC reiterating its willingness to prosecute excessive surcharge cases and the Federal Court handing down hefty penalties, businesses are being advised to review their own processes to ensure they’re not non-compliant.
In Europcar’s case, surcharges up to 1.43% were charged, with rates varying over time and by card type. These amounts were higher than what its bank was charging the company for accepting card payments, which was between 0.17% and 0.62%.
Are surcharges even worth it?
The implementation of excessive surcharge bans over the last few years, alongside the growing number of customers ditching cash in favour of cards, has raised questions about whether surcharges are even worth it in the first place.
Thousands of cafes across the country have been ditching the charges altogether over the last year in a bid to put themselves on better footing with consumers, and avoid the risk of getting a knock on the door from the ACCC.
A Finder survey of 2,012 customers last year found 94% think card surcharges are a “rip off”, while over two-thirds (68%) said they back out of purchases if they discover a surcharge.
Simon Peterson, owner of Pepper Cafe in Flemington Victoria, has never charged customers extra for paying by card.
“It’s a trust exercise with the customer,” he tells SmartCompany.
“We have people come in and complain about the hotel down the road because a pint at $9 becomes $9.20.”
Peterson says he would “110%” lose business if he began charging excess fees for card payments in the current business environment.
“It’s so competitive now, and in this particular scenario … fees are pretty fair now with eftpos charges.”
That’s money walking out the door, particularly as cash payments become less common and tap-and-go reforms stand to reduce the cost of accepting cards in the first instance.
As the Reserve Bank nudges along the major banks to implement merchant-choice routing for retail businesses, the price of accepting card payments is about to go down for most merchants anyway.
William Xia, owner of Sourdough Cafe in Sydney, has previously told SmartCompany ditching surcharges won him more business.
“Before, customers walked away so many times, and they didn’t come back … [now] we have a lot more customers coming back to us,” he said.
Check your statements
Businesses intent on surcharges are advised to check their merchant statements.
Banks and payment processors are required to send merchants statements that detail their cost of acceptance for card payments. It’s more paperwork, but worth a look to ensure excess surcharges aren’t being laid on customers.
Businesses charging a flat surcharge, as Fitness First did, could find themselves in hot water, particularly as the cost of acceptance changes over time, and varies from card to card.
Flat surcharges are ill-advised, particularly because they don’t adjust with purchase prices, meaning a 20 cent surcharge on a $1 purchase could only be legal if the cost of acceptance was a whopping 20%.