The Reserve Bank has made a commitment to narrow its definition of merchants' cost of card acceptance to simplify the regulation of credit card surcharging. RBA head of payments policy Tony Richards said implementation of the Government's plan to rein in excessive card payment surcharging would need to be "transparent, measurable and enforceable".As part of the Government's response to the Financial System Inquiry, Treasurer Scott Morrison said on Tuesday that the Government would legislate to ban merchants from imposing unfair card surcharges greater than the cost to them of accepting payment by card.The Australian Competition and Consumer Commission will be responsible for enforcing new surcharging regulations.The Reserve Bank has been down this road before. In March 2013 it introduced a surcharging standard in an attempt to stop excessive surcharging. Under the rules, merchants have a right to recover their card acceptance costs through a surcharge and card scheme operators have the right to set scheme rules that limit surcharging to reasonable cost.The "reasonable cost of acceptance" includes the merchant service fee charged by the merchant's acquiring bank and some additional costs. The RBA listed additional costs under five headings: other costs payable to acquirers, including fees for the rental and maintenance of payment card terminals; costs payable to other payment system service providers, such as gateway and switching fees; merchants' own costs related to card acceptance, such as the purchase and maintenance of their own card acceptance infrastructure; fraud costs related to acceptance, such as equipment required to mitigate fraud; and any fixed equipment, systems or development costs not captured under the other headings.For a number of reasons, including the difficulty of working with the RBA's convoluted definition of "reasonable cost", the 2013 standard was not effective.In a review of the scheme later that year the Commonwealth Consumer Affairs Advisory Council agreed with the majority of submissions that enforcement of the standard would be difficult. It said: "The actual costs incurred by merchants are not observable by the card schemes."Speaking at an Australian Payments Clearing Association conference in Sydney yesterday, Richards said the RBA's work on the framework for the new rules would include a narrower definition of costs."Cost of acceptance is a reasonable framework. Let's define it in a narrower way and make sure it is observable," he said.Richards also implied that the solution proposed by the FSI would not be adopted, describing it as "complex".The FSI recommended a three-tiered approach: low cost system providers, such as systems subject to debit interchange fee caps, should have the right to prevent merchants from surcharging; medium cost providers, such as systems subject to credit interchange fee caps, should be required to apply surcharge limits set by the PSB; and higher cost, unregulated system providers should continue to apply reasonable cost recovery rules.According to the RBA's most recent surcharge data (which was released in June last year), consumers are paying surcharges on 4.1 per cent of their card payments, with the median value of charges 1.8 per cent of the purchase price."Based