Comment: CCAAC fails to make appropriate surcharging recommendations

The Commonwealth Consumer Affairs Advisory Council has delivered a weak report on credit card surcharging, failing to make the one recommendation that almost every submission to its Inquiry urged it to make.

What card scheme operators, banks and consumer advocates told the council was that the Reserve Bank's new merchant surcharging standard, which was introduced in March this year, would not work unless a statutory body was given the job of monitoring merchant practices and enforcing the rules.

In its findings, which were published on Friday, the CCAAC expressed some sympathy with this view. It said: "There is likely to be a public benefit associated with a consumer regulator being capable of ensuring that credit card surcharges are limited to the reasonable costs of card acceptance."

It also agreed that enforcement of the standard may be difficult. It said: "The actual costs incurred by merchants are not observable by the card schemes."

However, it concluded that the "CCAAC does not advocate any amendment to the standard. The current regime is the result of extensive consideration by the RBA and it would be premature at this stage to recommend amendments."

Instead it suggested that "policy makers may wish to consider further consultation on possible amendments to the ACL [Australian Consumer Law], to require upfront disclosure of any fee or surcharge [and] disclosure of the availability of different types of payment methods."

Yes Minister's Sir Humphrey Appleby could not have worded it better.

The change the RBA made in March was to give card scheme operators the right to change their scheme rules, so as to limit surcharging to reasonable cost. This was in response to complaints from consumers and card scheme operators that some surcharges were excessive.

Under the new rules, merchants have a right to recover their card acceptance costs through a surcharge. The surcharge is limited to the "reasonable cost of acceptance", which includes the merchant service fee charged by the merchant's acquiring bank and some additional costs.

Following this, the Australian government then asked the CCAAC to look into the whole issue of credit card surcharging and transaction fees.

Visa's submission on this issue pointed out the difficulty of fulfilling the role the RBA had given it. It said card schemes have to limit the activities of merchants with whom they do not have direct relationships; card schemes work through acquiring banks, which have the direct relationship with merchants.

Commonwealth Bank's submission argued that card schemes should be excluded from taking on an enforcement role because they have a vested interest in discouraging merchant surcharging. It also argued that acquiring banks should not perform this role because they have an interest in maintaining their business relationships with their merchant customers.

Consumers' advocate Choice said: "Choice has consistently expressed concern that no government agency or regulator is responsible for enforcing or monitoring the new RBA surcharging rules. Further action is needed to enforce the new surcharging framework."

What the CCAAC has done instead is to identify a range of "better practice principles" whose adoption would improve the transparency of surcharges and fees. These include the adoption of simpler pricing methods and greater clarity on prices.

The CCAAC's recommendations sit oddly with the findings of its Inquiry, which show that consumers buying cheap flights can pay a surcharge of A$17 on $49 tickets and that one consumer paid a $950 surcharge on a $50,000 purchase.