Payment Systems (Regulation) Act 1998
Variation to Standards Relating to Merchant Surcharging: Explanatory Statement
Background to the November 2012 Variation
This variation changes the effective date of new provisions in Standards relating to merchant surcharging that allow the designated credit card and Visa Debit systems to limit merchant surcharges to the reasonable cost of card acceptance.
In 2003, the Reserve Bank of Australia (the Bank) began implementing reforms to the debit and credit card systems in Australia. As part of these reforms, the Bank put in place Standards that removed restrictions – placed on merchants by the international card schemes – which had prevented merchants from imposing a surcharge on card transactions. The removal of these ‘no-surcharge’ rules was aimed at improving price signals to cardholders about the relative cost of different payment methods and enhancing the ability of merchants to place downward pressure on merchant service fees and interchange fees.
The wording of the Standards had provided merchants with the freedom to set surcharges without constraint. Although the benefits from removing the no-surcharge rules have been substantial, in recent years it has become apparent that some merchants have been adopting a number of surcharging practices that have the potential to distort price signals, thereby reducing the effectiveness of the Bank’s reforms. In particular, concern has been expressed to the Bank that in some cases surcharges appear to be well in excess of the cost to the merchant of accepting the relevant card, and there has been an apparent increase in the use of ‘blended’ surcharging where different cards are surcharged at the same rate despite significant differences in acceptance costs.
After considering available data and views from interested parties as part of an extensive consultation process, the Bank varied these Standards in June 2012 (‘the June variation’). The June variation relaxed the Standards by providing the card schemes the capacity to limit the level of surcharges to the reasonable cost of card acceptance, while continuing to allow merchants to fully recover the cost of accepting those cards should they choose to do so. The June variation was aimed at ensuring that the Bank’s surcharging reforms continue to meet their original objectives, and specified that the variation will take effect on 1 January 2013.
As a preliminary step in implementing the varied Standards, the Bank published a draft Guidance Note with the June variation as non-legally binding guidance on the costs that might be included in ‘the reasonable cost of acceptance’, and sought views from interested parties by 20 July 2012. After considering these views, the Bank published a revised draft Guidance Note in August, and sought views from interested parties by 21 September 2012.
Following the receipt of submissions and consultation with interested parties, the Bank concluded that it would be in the public interest to delay the date on which the varied Standards come into effect as this would provide participants and other interested parties more time to consider the best way to implement and respond to the varied Standards. Accordingly, the Bank has again varied the Standards to move the effective date of the provisions of the June variation from 1 January 2013 to 18 March 2013.
Purpose and Effect
The purpose of this variation is to delay the date that the varied Standards – as amended by the variation gazetted on 12 June 2012 – for the designated credit card and Visa Debit systems will come into force. The delay will provide participants in the designated payment systems and other interested parties more time to consider the best way to implement and respond to the varied Standards. The Bank considers the current variation to be of a minor technical nature.
The variation has the effect of amending the date on which the varied Standards will come into force from 1 January 2013 to 18 March 2013.
Statement of Compatibility with Human Rights
For the purpose of the Human Rights (Parliamentary Scrutiny) Act 2011, section 42 (disallowance) of the Legislative Instruments Act 2003 does not apply to determinations and variations of standards under section 18 of the Payment Systems (Regulation) Act 1998.
Documents
- Reserve Bank of Australia (RBA) (2011), Review of Card Surcharging: A Consultation Document, June.
Available at <http://www.rba.gov.au/publications/consultations/201106-review-card-surcharging/index.html>.
- RBA (2011), A Variation to the Surcharging Standards: A Consultation Document, December.
Available at <http://www.rba.gov.au/publications/consultations/201112-variation-surcharging-standards/index.html>.
- RBA (2012), A Variation to the Surcharging Standards: Final Reforms and Regulation Impact Statement, June.
Available at <http://www.rba.gov.au/payments-system/reforms/cards/201206-var-surcharging-stnds-fin-ref-ris/index.html>.
- RBA (2012), Guidance Note: Interpretation of the Surcharging Standards, November.
Available at <http://www.rba.gov.au/payments-system/reforms/cards/201211-var-surcharging-stnds-guidance/guidance-note.html>.
Reserve Bank of Australia
SYDNEY
23 November 2012