PASSINGOVERCREDIT CARDFEES

B A K E R A F F L E C K M O F F R E Y

03.

Passing over credit card fees

You may have noticed the recent publicity surrounding the Federal Government’s responseto the Financial System Enquiry that was released in late 2015. The Government proposed anumber of recommendations and government actions, which can be accessed here. Not allthese apply to the field of management rights, however one sticks out.

Recommendation 17, entitled “Interchange fees and customer surcharging” could have aparticular effect to management rights businesses. Essentially, the recommendation statesthat by improving regulation on interchange fees and surcharges, the government willimpose more prescriptive limits on surcharging to ensure that customers who use low-costpayment methods cannot be over-surcharged. This will affect many businesses acceptingcredit card payments especially those in management rights who are profitting from excessfees.

Action that will be taken remains vague at the minute, however a legislated ban will beintroduced to target surcharges that “exceed the reasonable costs faced by merchants inaccepting cards.”

An example used during the press conference announcing the response states that the realcost of credit cards to business was approximately one to two percent, but some businesseswere found to be charging processing fees of as high as 10%.

Therefore, it seems that credit card surcharges will need to pass a “fair-dinkum” test. Thatis, that the costs are justified. The legislation due to be released some time early this yearwill define exactly what the regulation will entail.

In the meantime though, if you do have a significant revenue stream from credit card

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surcharges, it is worth considering whether that will be sustainable when these regulationsare introduced. It is advisable to begin exploring alternative methods of arrangements withletting owners along the lines of % revenue split or bundling which is clearly allowedwithin the Property Occupations Act.

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If you seek clarification for any of the points madein this article please visit the official response

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