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Payment Systems (Regulation) Act 1998 - Variation to Standards Relating to Merchant Surcharging (November 2012)

Payment Systems (Regulation) Act 1998 - Variation to Standards Relating to Merchant Surcharging (November 2012)

Administered by Department of the Treasury

Legislation au F2012L02273 Not in force Legislative Instrument

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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

Overview

The Payment Systems (Regulation) Act 1998 was enacted to regulate payment systems in Australia and ensure that these systems operate in a fair, efficient, and secure manner. This Act was introduced to address the need for a regulatory framework that governs the operations of payment systems and protects the interests of consumers, merchants, and other stakeholders. The Act was enacted by the Parliament of Australia, with the overarching policy objective being to maintain financial stability and consumer protection within the payments industry. In November 2012, a variation to the Standards relating to merchant surcharging was introduced by the Reserve Bank of Australia (RBA). This variation, which was a response to concerns about excessive and inconsistent merchant surcharges, aimed to ensure that the RBA’s reforms continue to meet their original objectives by allowing card schemes to limit surcharges to the reasonable cost of card acceptance. The variation also provided more time for participants and interested parties to implement and respond to the amended Standards by delaying their effective date from 1 January 2013 to 18 March 2013.

Scope and Application

The Payment Systems (Regulation) Act 1998 applies to the payment systems and entities within the financial services industry in Australia. Specifically, it governs designated credit card and Visa Debit systems, allowing the Reserve Bank of Australia to impose Standards on these systems to regulate merchant surcharging practices. The Act's jurisdiction extends nationally, as it pertains to the regulation of payment systems across Australia. The recent variation to the Standards concerning merchant surcharging, aimed at ensuring surcharges are reasonably related to the cost of card acceptance, applies to all merchants and consumers who engage in transactions using designated credit cards and Visa Debit cards. The variation was enacted to provide a delay from 1 January 2013 to 18 March 2013, allowing more time for stakeholders to implement and adapt to the new Standards. This variation is considered minor and technical in nature, focusing solely on the effective date of the Standards, without altering their substantive content.

Key Provisions

The main sections of the Payment Systems (Regulation) Act 1998 that are relevant to this variation concern the standards relating to merchant surcharging. The Act empowers the Reserve Bank of Australia (the Bank) to set standards for payment systems, including those that govern merchant surcharging. These standards were initially designed to allow merchants to impose surcharges on card transactions, a practice previously prohibited by international card schemes (sections 17 and 18). The variation in question modifies the effective date of these standards to address concerns about excessive or inconsistent surcharging practices by merchants (section 18). The obligations and requirements imposed by this variation on the parties involved, particularly the credit card and Visa Debit systems, are significant. These entities must now ensure that any surcharges imposed on consumers are limited to the reasonable cost of card acceptance, as defined in the varied standards. This includes allowing merchants to fully cover their costs if they choose to do so but preventing them from charging amounts that exceed these costs. The systems must also provide sufficient guidance and support to merchants to help them implement these changes effectively and fairly. Furthermore, the systems need to monitor and enforce compliance with the new standards to prevent any misuse of the surcharging practices. There are no explicit offences, penalties, or consequences mentioned in the explanatory statement for breaching the varied standards. However, the Bank's authority under the Payment Systems (Regulation) Act 1998 likely includes the power to take enforcement actions against non-compliant entities, which could include issuing fines or other penalties. Given the regulatory nature of the Act and the Bank's mandate to ensure fair and efficient payment systems, any significant breaches of the new standards could result in such enforcement actions. The exact penalties for non-compliance are not specified in the explanatory statement but would likely be determined in accordance with the general provisions of the Act and any relevant regulations or guidelines issued by the Bank.

Area of Law: Commercial Law
Instrument: Regulation
Concepts: Reporting & Disclosure Obligations; Regulatory Standards; Compliance Obligations

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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