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Wednesday, January 13

Commerce Commission watching retailers’ credit card surcharges

The Commerce Commission is taking a close interest in the surcharges some retailers have introduced this week for consumers paying by credit card and will continue to monitor developments.


The surcharges have come about following changes introduced by Visa and MasterCard and the major trading banks, after the Commission investigated anti-competitive arrangements between them over the fees the banks charged to retailers for credit card transactions.


“Retailers incur significant charges imposed by their banks for accepting credit card payments. Arrangements between the credit card companies and the banks prevented retailers from passing on these costs to customers who presented credit cards by way of payment,” said Commerce Commission General Counsel Peter Taylor.


“The industry referred to this as the no-surcharge rule. It led to consumers effectively cross-subsidising credit card use even when they paid by other methods. Retailers had to absorb the credit card costs across their business, meaning all consumers paid higher prices regardless of the payment method used,” said Mr Taylor.


Settlements the Commission reached last year with the credit card companies and the banks included an undertaking that those parties would no longer enforce the no-surcharge rule.


“Importantly, included in the settlements was a requirement that credit card-issuers set their own credit card transaction fees in competition with one another. As a result of that settlement, from April this year most retailers will pay lower fees to their banks on credit card transactions. As retailers now have the ability to pass the cost of credit card acceptance directly to the card-holder, pressure can be brought to bear on credit card issuers to reduce their transaction fees. This should over time result in decreased costs to credit card users while benefitting retailers and their customers through reduced costs,” said Mr Taylor.


The Commission will be watching developments to ensure that the long-term interests of consumers are being served.

Last night TVNZ erroneously stated that credit card surcharges have come about due to a law change. In fact the law has not changed nor is there a regulatory regime in place in New Zealand that specifically governs credit card transaction fees charged to merchants. Rather, the card schemes and banks have altered their behaviour in order to comply with the Commerce Act 1986.


Retailers are also reminded of their obligations under the Fair Trading Act to adequately disclose fees so that consumers can make an informed choice.