Competition and Consumer Amendment (Payment Surcharges) Bill 2015
2 February 2016
Labor welcomes the introduction of the Competition and Consumer Amendment (Payment and Surcharges) Bill 2015 because it does two things which are vitally important for the Labor Party. It reduces the cost of living for Australians and it boosts competition so as to increase productivity, wages and living standards. The Financial System Inquiry recommended improving surcharging regulation by ensuring customers using lower cost payment methods cannot be over-surcharged. The final report of the Financial System Inquiry was released in November 2014. In that sense, it is mildly disappointing that it has taken the government over a year to implement this largely noncontroversial recommendation, which, as the House would have noted, enjoys furious bipartisan support.
The legislation will help ensure Australians are not ripped off when using their credit cards. It will increase the efficiency of the payments system and ensure that we get better and fairer outcomes for consumers. The bill specifically amends the Competition and Consumer Act to include a ban on excessive surcharging, allowing the Australian Competition and Consumer Commission to take action against corporations and others specified under section 6(2)(e) of the Competition and Consumer Act that engage in excessive surcharging.
What is an excessive surcharge? It is excessive if it exceeds the level permitted under a Reserve Bank standard or else set out in the regulations. I should put on record that I do hope that those levels will reflect the cost of processing the individual transaction and not roll into that the additional fraud costs that credit card issuers may face. Fraud is a real factor within the credit card industry but, in my view, it is not fair that decent, law-abiding credit card users should be asked to pay a surcharge that covers the cost of fraud for the credit card industry. Fraud should be cracked down on by the credit card industry themselves, who have a range of ways of reducing the cost of fraud. We on this side of the House trust that sensible definitions of what is considered excessive will be created and that they will not inhibit competition between retailers on surcharge levies. Normally we want to see a race to the top; in this case we want to see a race to the bottom among credit card issuers in terms of the surcharge they charge.
According to MasterCard and the consumer group CHOICE, as of March 2015 Australian consumers were being charged a collective $1.6 billion a year in credit card surcharges. In one case CHOICE analysed, Tiger Airways applied a 1,479 per cent surcharge mark-up on a $132 ticket. Last year the Australian Competition and Consumer Commission took two airlines to court for 'drip pricing', accusing them of misleading customers by adding high 'booking fees' for card payments at the end of online flight bookings. The fees can range up to a $30 flat fee. But this is not just an issue for airlines; it can apply across multiple sectors of the Australian economy.
Consumer respondents to a survey commissioned by CHOICE in 2013 reflected dissatisfaction with the surcharging practices of airlines, ticketing agencies, cinemas and theatres, taxis, telecommunications, utility providers, and accommodation and tourism providers. It is not just the surcharge on the Taylor Swift ticket; it is the airfare to get there, the taxi to get to the concert and the hotel you are staying in that evening. Forty-three per cent of the survey's respondents indicated they had often encountered surcharges and fees above 2.5 per cent. Some respondents reported paying surcharges as high as 33 per cent. These surcharges can be highly misleading and prey on some of the most vulnerable in our community.
The same CHOICE survey found that around 40 per cent of those who had been slugged with a surcharge in the last three months said that they did not know how much the surcharge was. Worse still, 44 per cent reported that they were not offered or made aware of another payment method that did not attract the surcharge. Other payment methods exist, such as POLi—a technology which understandably makes some feel uncomfortable because it requires you to enter your bank login details on a website that is not that bank's. POLi is an alternative, but it would be a better outcome if credit card surcharges were lower.
The bill will boost competition. The Commonwealth Consumer Affairs Advisory Council reported in 2013: While surcharging is not a universal practice, it is more common in industries typically seen to lack strong competitive pressures.
The bill is a useful way to help address some of the problems that arise from Australia's relatively concentrated markets. Australians want these surcharges to be as small as possible, and Labor is happy to support the passage of this bill because it works towards that aim.
Removing these surcharges was a key recommendation of not only the Financial Services Inquiry but also the Labor-led Senate inquiry into the use of credit cards which reported at the end of last year. We hope the government will adopt the 10 other recommendations coming out of that Senate inquiry in order to help ease cost-of-living pressures and boost competition. I commend the bill to the House.