Central Bank To Limit Card Transaction Fees

Post by Sharat on June 18, 2012 · Under banking, Business News · Comment

Cabcharge, the Australian taxi payments operator says its services are unlikely to be affected by the RBA decision to limit the amount companies can charge consumers for credit card transactions.

According to the new regulations, beginning January 1^st 2013, merchants are supposed to charge transaction fees that are deemed “reasonable” that is to reflective of the costs of accepting payments made by credit cards, which include bank fees and any additional costs such as terminal fees.

Consumer advocacy group Choice, has levied accusations of overcharging against many companies, including Cabcharge, Virgin Australia and Qantas.

In its denial, Cabcharge said that rather than representing a surcharge on taxi payments, its fees served as a charge for financial services.

“The costs and challenges of providing and operating the Cabcharge system as a financial service provider to the taxi industry nationally are significant and of a different nature to the examples referred to in the Variation to Surcharging report. Cabcharge’s transaction business is based on service fees in the taxi environment in which taxi fares are totally regulated. Cabcharge’s business applies fees on financial services rather than as a surcharge on the underlying transaction.” Cabcharge said in the statement.

Matt Levey a spokesman and head of campaigns for Choice said there was some ambiguity in the new regulations.

“A lot of this absolutely depends on how you define the reasonable cost of processing a credit card. The RBA has indicated that they are going to offer some guidance around that, but they won’t actually be, if you like, mandating that legally.At the end of the day, it’s actually going to come down to these agreements between the credit card providers and the merchants to actually draw down those costs.” Mr. Levey said.

Despite the ambiguity, David Masters, a vice president at Mastercard said card companies will now be able to take action against those companies who overcharge their customers.

“We’ll be looking pretty hard at those sorts of organisations; and here I’m thinking of car rental, hotels, airlines, the taxi industry, where very clearly people are using surcharging not as a cost-recovery method but as a way to pad out revenues,” Mr Masters said.

Qantas says it is reviewing the decision of the central bank.

“The announcement states that merchants will continue to able to recover the reasonable costs of card acceptance, as Qantas has always done. We do not recover more through surcharges than it costs us to offer credit cards as a payment method.” The airline said

This article first appeared in the news section of Money-AU, Australia’s premium personal finance website