I rise to speak on the Competition and Consumer Amendment (Payment Surcharges) Bill 2015. For many years now, the Greens have been pointing to the exorbitant amounts being made by banks and credit card companies when people do little more than use their own money, often in situations where they have no choice other than to use a card or have their transaction processed electronically. It has been an excuse for banks, credit card companies and many others to make hundreds of millions of dollars, if not more, off the back of people doing no more than just going about their everyday life. In previous parliaments, we have pushed for reform on this front, and I am pleased that now there is some action being taken with respect to credit cards at least. It could be more, and, to that end, we will be seeking to broaden the bill to cover other areas where people are being similarly gouged.
This bill reflects part of the government's response to the recommendations of the financial system inquiry. It amends the Competition and Consumer Act 2010 to establish a framework to ban surcharges imposed with respect to particular payment methods that exceed the cost of acceptance for those payment methods and to provide the ACCC with additional powers to gather information and issue infringement notices in enforcing the ban on excess surcharges. We are talking about the charges that sometimes appear online or in a shop when you use your credit card. It might be a little note saying an X per cent fee will be applied, or it might be a certain amount. We know that that is more than what it costs the provider to use the service. In other words, someone is making a profit just because you choose to use a credit card. In that respect, we support this bill as the first step in addressing unfair fees and charges that Australians are being forced to pay for financial services.
Since an RBA ruling in 2012, credit card surcharges were meant to have been limited to the reasonable cost to the business of processing the transaction, which for Visa and MasterCard was about 0.8 per cent and for American Express and Diners Club about two per cent. But people would have seen, when they make those transactions, including online, that it is often much higher. It is important to underscore that the Reserve Bank has had powers to crack down on this for some time. Those powers are set out in section 10 of the Payment Systems (Regulation) Act 1998, which includes the setting of Reserve Bank standards on payment systems designated by the RBA for regulation. As the explanatory memorandum makes clear, MasterCard, Visa, EFTPOS and American Express companion cards have all been designated—some have not, but many have. The Reserve Bank standards apply to that system and:
… cover a range of aspects including interchange fees and merchants’ card surcharge arrangements. For instance, under the Reserve Bank standard on merchant pricing, regulated payment system may not prevent merchants from imposing a surcharge on customers who pay with credit cards. American Express and Diners Club have voluntarily undertaken not to prevent merchants from imposing charges on customers who pay with their cards.
The issue is the reasonable cost of using the service and whether or not that is actually been met. The problem has been—and many have pointed this out for some time—it has been left up to the companies to enforce the requirement. As a result, there have been surcharges that are well in excess of that. Many surcharges are as high as 17 per cent, and the worst offenders have been companies like the airlines. In one of the more extreme cases analysed by consumer organisation after the RBA ruling, a 1,479 per cent surcharge was applied to a $132 ticket by Tigerair. That is the kind of gouging that has been going on. As a result, as of March 2015, Australian consumers have been charged a collective $1.6 billion a year, according to MasterCard data made available to at the time. If this legislation works, it will reduce this burden, and that is why the Greens intend to support it. As the explanatory memorandum states:
The measure will also ensure that any cases of excessive surcharging can be readily addressed by the ACCC which will be the primary enforcement agency for the ban.
Under the … Act as it currently stands, there is no specific prohibition against excessive surcharging. However, there are existing provisions that prohibit false and misleading misrepresentations. The amendments will complement these existing provisions of the … Act.
To that extent, it is a good step towards getting proper enforcement of the RBA ruling. The RBA ruling was good. This is not an area where we should be allowed to make profits. You should just be able to charge the customer what it actually costs you to provide that service, that transaction. In that respect, it is good, it is worthy of support, and that is why will support it.
But this is where it does not go far enough: it fails to deal with one of the biggest areas of financial charges that slug consumers every day, and that is ATM fees when you go to the teller machine. If we are doing this for credit cards, we should also do it for ATM fees. Banks are making up to $600 million a year from ATM fees. If credit card operators are now not allowed to make a profit from the use of a card, neither should banks. We know that banks collect around $12 billion in fees from customers every year—that is, fees right across the board. But we also know that Australians are paying over $600 million a year in ATM fees as part of this enormous amount of money acquired from consumers by the banks. Much of that is just going straight to the banks' bottom line. Whilst I think everyone would accept, and the numbers are clear—the use of payWave and online banking services means that there is a decline in ATM use—the amount of fees being paid by consumers is still enormous.
You especially find this if, for whatever reason, you find you cannot go to your own bank but you need to withdraw money. If you go to a bank that is not your own bank, some of the fees there are significantly higher than what it costs the bank to provide that service. The fee to go to another bank could be $2 to $2.50, sometimes up to $3. It is even higher in some regional areas and in areas where access to machines is limited. I have even seen higher fees approaching the $3 mark on some of the private ATMs that are around the place. The RBA says the average fee for a foreign withdrawal—that is, going to a bank that is not your own—is about $2.33. That is up from $2.04 in 2010. When you go to the bank to access your own money, the banks can gouge you with fees of $2 or more when we know it only costs them about 77c for an ATM transaction.
On average, it costs a bank 77c when you put your card in, do your account balance or get your money out and have that all processed, but people are being charged $2, $2.50 and sometimes $3 for the privilege of accessing their own money. These fees are not only unfair but also regressive because they hit people who are taking out smaller amounts or have smaller balances worse. Two dollars and 50c means a lot more to someone with $50 in their account than to someone who might be able to access $1,000 in their account. We know that many people have changed their behaviour and try to withdraw cash as much as possible from their own ATMs. But, as many of us know, there are many times when that is just not possible—for example, where you need the cash, because that is the only thing the shop will accept and the only ATM that is nearby is not one that is your own. You may have made your best endeavours, but you just cannot do it.
The Greens believe that banks should not able to make a profit out of this. If you are going to another bank or going to your own bank, okay, then maybe the bank can charge you the cost of recovering that. But, in an era where you have no choice but to have a bank account and where bank branches are not as easy to get to as they used to be and where banks have a guaranteed stream of money piling into their coffers every day, people should not be charged for the privilege of accessing their own money and banks should not be allowed to make a profit out of people getting their own money out of the bank.
It is worth remembering that the big four banks alone make up to $30 billion in profit every year, and some of that is coming from people paying $2, $2.50 and $4 for an ATM fee when it only costs the bank 77c. According to the RBA, there are now more than 31,000 cash machines around the country, which the RBA says is high relative to Australia's population when you look overseas. Fifty-five per cent of the ATMs in Australia are owned by specialist ATM companies. They are the ones that you might find in a restaurant, in a pub or somewhere else. But banks and other financial institutions own the rest. They own just under half.
While it may be difficult—and we accept this—to limit the fees that private operators are charging, we can take some steps towards regulating what the banks charge. The banks enjoy significant support from the Australian public, especially the big four, because we know they are too big to fail and the government will step in and help them if they ever get into trouble. So, given that support and given the extent to which the government is regulating them already and given that the government is saying that credit card companies and merchants should not be allowed to make a profit out of fees, let's apply the same logic to ATM fees as well.
I will be moving amendments when we get to the consideration in detail stage that will prevent banks from charging ATM fees that are excessive and will require the fees to reflect the reasonable costs of allowing a person to make an ATM transaction. For the benefit of the House I will outline some of those amendments now. The amendments will create a new part in the act, part IVD—ATM transactions—and a new section will be created, section 55N, which sets out the object of the part. The object of the part is to ensure that account holders are not charged for ATM transactions made using automatic teller machines owned or leased by the persons with whom their accounts are held and that amounts charged for other ATM transactions are not excessive and reflect the reasonable costs of allowing a person to make an ATM transaction.
A new division will be created which puts a limit on ATM fees: firstly, by banning any fees charged by banks for use of their own ATMs—because we believe very strongly that, if the bank is getting your money, you should not be charged for the privilege of accessing it and getting it out of an ATM machine—which reflects the current practices of pretty much all of the banks; and, secondly, by requiring the Reserve Bank to issue standards in relation to ATM fees charged by authorised deposit-taking institutions that take into account the public interest and limit them to an amount that reflects the reasonable costs of allowing the person to make the transaction. This will mean that authorised deposit-taking institutions, banks, will be prevented from charging fees that are excessive and do not reflect the standard.
So, in a nutshell, the Australian Greens are supporting this bill, because it says credit card fees should not be in place where intermediaries or the end users are able to make a profit out of you using the credit card. Get charged a fee for using it, sure, but it should not something you can make a profit out of. We say, 'Great idea. It is something we have been pushing for for a while. Let's extend it to ATM fees and make sure banks, which are making record profits, are not able to make a profit out of you accessing your own money. Let's end these $2, $2.50 and up to $3 fees that banks sometimes charge. Let's limit it to what it actually costs the bank, which we know is closer to 77c. Let's ensure that the good principle in this bill is extended and that banks are prohibited from using the fact that, in this day and age, everyone is required to have an electronic bank account as a way of making money out of people just because they want to get their own money out of an ATM.
We support the bill and I hope that the government, because they support the principle of this bill by introducing it, also support the amendments. It is exactly the same principle, but we are just doing it for ATM fees as well as credit card fees.
I rise to speak on the Competition and Consumer Amendment (Payment Surcharges) Bill 2015 and commend both the Treasurer and the Assistant Minister to the Treasurer for bringing this bill before the House. This is an important bill that will have a positive effect on Australian consumers on a daily basis. Prohibiting excessive and unfair payment surcharges by merchants is a good reform that has a practical and beneficial impact.
It is an unfortunate reality that some merchants have been unscrupulous in passing on unnecessary surcharges to consumers in the name of 'cost recovery'. Australia has seen exponential growth in the use of credit cards at the terminal and when shopping online. We are so accustomed to it that we really think nothing of it. Many Australian consumers now carry little or no cash; instead, choosing the ease and convenience of using their card to make purchases. This practice is only becoming more prevalent, as usage of ATMs has plummeted to an all-time low while EFTPOS transactions have more than doubled since 2009 and 'tap and go' is a popular convenience.
We are now seeing the technology for cardless withdrawals at ATMs and making payments using a smart phone. Consumers regularly encounter retailers applying surcharges if paying by card and displaying minimum transaction fees. The local takeaway store has the convenience of an EFTPOS machine, but there is that minimum spend of $10 for the privilege of using it—otherwise be prepared for an additional cost for your chips and gravy. A $4 cup of coffee conveniently paid for by a tap of plastic can add an extra 50 cents or even a dollar to the total. So a week's worth of coffee alone adds up. 'Tap and go' is a sneaky trap since consumers are often charged credit card fees, even if using a debit card, when they could possibly avoid the fee by inserting or swiping their card instead.
In 2010 the coalition made an election promise to conduct an examination of Australia's financial system and in 2013 the government established the Financial System Inquiry, which was asked to make recommendations that would create a financial system to support and meet Australia's economic needs as we continue to grow and evolve. The final report from the Financial System Inquiry was delivered to the government in November 2014, and in October 2015 the government provided its response to this report.
The government has used the report to set an agenda for improving our financial system across a range of areas. It was noted in the report the significant consumer concern for the imposition by merchants of payment surcharges that were considered excessive. In fact, there were over 5000 submissions to the inquiry in this regard, and many of these submissions called for surcharges to be banned. Some industry submissions noted the important role surcharging could play in accurately reflecting the cost faced by merchants in accepting certain high-cost payment methods. In the inquiry's final report a recommendation was made to improve interchange fee regulation by clarifying thresholds for when they apply; by broadening the range of fees and payments they apply to; by lowering interchange fees. It further recommended an improvement in surcharge regulation by expanding its application and ensuring customers using lower cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging. The government has responded accordingly, stating in its response:
We will increase the efficiency of the payment system and ensure it achieves fairer outcomes for consumers, merchants and system providers by phasing in a legislated ban on excessive card surcharges.
The government agrees that it is necessary to take action to improve interchange fees and surcharging arrangements to achieve a more efficient system and to deliver fair outcomes.
The amendments contained in this bill will enhance transparency for consumers and improve price signals on payment method costs. Helping consumers to understand the costs of competing payment methods and encouraging the use of the most efficient methods of payment. In March 2015 the Payments System Board noted in its review of card payments regulation report that over the last two decades there has been a marked increase in the absolute and relative use of debit and credit charge cards in Australia. Overall the value of card transactions has grown at an annual rate 8.8 per cent since 2002. Card payments account for over 60 per cent of the number of non-cash payments in the economy. The report also noted that, despite modification of surcharging standards in March 2013 to address concerns about excessive and blended surcharging, excessive surcharging remains a concern for many stakeholders, citing the volume of submissions received by the Financial Systems Inquiry.
This bill amends the Competition and Consumers Act 2010 to prevent merchants from passing on excessive charges when the consumer opts to pay in a particular way. Importantly the changes do not prevent a merchant from levying a payment for the actual costs of processing a card payment; it simply prevents profiteering. Specifically, the bill defines a payment surcharge as an amount charged in addition to the price of goods or services for processing payment for the goods or services or an amount, however described, charged using one payment method rather than another. Currently excessive surcharging by merchants may be, and usually is, prevented under contractual arrangements between payment systems and merchants, but are not banned by law. The Reserve Bank of Australia has sole responsibility for designing a particular payment system as being subject to RBA regulation and setting standards and rules for participation in the payment system. The RBA standards allow card payment systems to cover a range of aspects, including interchange fees and merchant card surcharge arrangements. Interchange fees exist in varying degree, depending on which financial institution the consumers and merchants are with. Interchange fees refer to the fee charged by the merchant's financial institution to receive the transfer of payment from the consumer's bank account. The difficulty with interchange rates, however, is that they vary across a number of categories. For example, charities do not pay interchange fees, whereas premium cards are an average of just under one per cent.
This new legislation will mean that excessive charging by merchants where the additional cost passed on is above the merchant's cost of acceptance of the payment method will be banned. The Australian Competition and Consumer Commission, the ACCC, will be the primary enforcement agency for compliance with this plan and should the ACCC determine a breach of regulation in relation to payment surcharges, it may issue an infringement notice penalty of up to 600 penalty units—that is, $108,000 for corporations. The ACCC will be empowered to request documents or other information from payment system participants in order to determine if they are compliant. The permitted surcharge will be set in most cases by the RBA. In cases where payment systems are not covered by the RBA standard, the permitted surcharge will be set in regulation.
The government recognises the ongoing technological evolution of cashless payments and therefore understands the need for maintaining flexibility in regulatory regimes, and the government will continue to monitor and remove any disincentives or discouragement's for commercial activity. As the assistant minister to the Treasurer noted in his second reading speech:
So, these new rules do not merely establish a 'best practice' framework, but contain real teeth to achieve targeted and meaningful behavioural change.
He also noted:
Each month around $45 billion of purchases are processed through more than half a billion card transactions.
According to the RBA's Payment Systems Board data, in the 2014-15 financial year approximately $1.9 billion was charged in merchant fees on Visa/MasterCard purchases and $926.5 million on American Express and Diner's Club purchases. That is a total cost of $2.826 billion in merchant fees for the 2014-15 financial year. To put this in perspective, that is an estimated average of $120 in merchant fees for every person in my electorate of Dobell every year—around $17.4 million in merchant fees just from the people of Dobell every year.
Surcharging is currently common and problematic, so any measures such as the amendments contained in this bill are going to make a hip-pocket difference to Australians. These amendments seek to improve efficiency and allow greater transparency for consumers in terms of knowing actual costs involved for various payment methods while still providing merchants the freedom to ensure they obtain appropriate cost recovery.
This legislation ensures that everyday Australian consumers are being fairly treated at the cash register and are not being taken advantage of. Some of the biggest complaints when it comes to merchant surcharges are in relation to airlines, taxis and entertainment ticket vendors. This legislation now closes the loophole for so-called transaction fees or administration fees to be loaded onto credit card payments by the merchant, instead restricting the charge to actual costs incurred. The amendments in this bill will ensure that excessive surcharging no longer occurs and that any merchants who continue to operate in this manner will be actively addressed by the ACCC. This bill's explanatory memorandum notes:
…if charges described as ‘booking’, ‘service’, or ‘transaction’ fees are in substance imposed as a result of the payment being made by card rather than an alternative payment method such as cash or direct debit … they are intended to be caught by the ban. If on the other hand, additional fees are applied equally regardless of payment method used, and do not purport to be for the purpose of compensating for the cost of payment acceptance, they are not properly ‘payment surcharges’ and are not intended to be caught. Uniform ‘add-on’ payments such as these will remain subject to other consumer protection action to the extent that they breach misleading and deceptive conduct or other consumer protection provisions …
The amendments proposed by this bill are fair and considered for both merchants and consumers. I thank the Treasurer and the Assistant Treasurer for their efforts in bringing this bill to the House following extensive research, consideration and consultation. I commend this bill to the House.
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.
Mr CRAIG KELLY
I am pleased to speak tonight on the Competition and Consumer Amendment (Payment Surcharges) Bill 2015. When I first came across this legislation, at first blush, I had some difficulty in supporting it. At second blush I also had some difficulty supporting it. But I do support the legislation and, in the time available, I would like to go through what my concerns are, why I had some concerns about this legislation and what got me over the line to support it.
Firstly I believe in a simple principle: all pricing decisions of businesses in our free market economy must be left to the individual business. It should not be up to governments to interfere and to try and put price controls on businesses. It is a simple thing: businesses must make those decisions and be left to make those decisions by themselves. We think parliamentarians and members of parliament should get in there and do something, make the prices fair, interfere with the market and put on regulations. If you want an example of what happens when you go down that track, you go to the socialist utopia of Venezuela, where their government decided that they wanted to have fair prices on toilet paper for consumers. Yet you cannot buy toilet paper in Venezuela. There is a well-documented toilet paper shortage. It is well known that the final stage of socialism is when you run out of toilet paper, as they have in Venezuela. That is my first concern. We should simply be leaving these pricing decisions to the market and trusting the free market.
The second concern I have with this bill is the definition of an 'excessive' surcharge—that it exceeds the costs that the merchant charged for that surcharge. One thing that has not been noted in this debate is that merchants have a risk when they process someone's credit card that is a different risk profile from when they receive cash from that customer. Some businesses may prefer the credit card because the money goes directly into their bank account. But with that comes an additional risk profile that is known in the retail industry as a chargeback.
The way that works is: if someone goes into a retail shop and uses their credit card instead of cash they get greater rights as a consumer. They are able to ring up the credit card company later and make a complaint that there was some problem or defect with the goods, the goods were not delivered or they were not as specified, and the bank then puts the obligation back on the merchant to try and justify why they should not make that chargeback. In many cases the merchants find that they are guilty until proven innocent. So they not only get the money chargeback by the credit card company; they get a fee and a surcharge for doing so.
There is a second risk for merchants that operate online businesses or take orders over the phone. If a merchant takes an order over the phone and gets a credit card number over the phone where they do not physically sight the credit card, that transaction is liable to be fraudulent. You do not know if that person owns that credit card or whether it was someone working at a restaurant that sighted that credit card number, jotted it down, jotted down the name, jotted down the expiry date and then went and ordered things online. In those circumstances the merchant can be charged back up to two years after they have had the money deposited in their account.
I would like to give an example from before I came to this place. I was the export manager for the company I was working with. At that time we were exporting a lot of goods to the Middle East. Of course, the Middle East payment, which was received by letter of credit or deposit, was of concern. One day an order inquiry came in over the internet by email for a certain amount of goods, and the quote went back to these people. Then they tried to negotiate a discount, and we gave them a small discount. Then they asked: could we give them a free-in-store price into the Middle East? As we often did, we would negotiate with one of the freight forwarders, get a cost for the freight, put that into the price and say to the customer, 'Here you are. Would you like to go ahead with this transaction?' In this circumstance, the cost was around $12,000 or $13,000. The customer was ringing up, saying they needed the goods urgently. I said, 'Well, we need to get your payment.' They said, 'Okay, we will pay you by credit card.' So they gave us a credit card number over the phone with a name and an expiry date—of course, there was a bit of suspicion that went on. We put that transaction through our credit card processing machine, the transaction was actually authorised and that $15-odd thousand went into our company's bank account.
So the money was sitting in the company's bank account. The customer, whose order we have taken in good faith, was ringing up, saying, 'Urgent, urgent! I need my goods; get them away. You've got my money; you've got my payment.' But the fact was that, because we had not been able to sight their credit card, for up to two years after that transaction occurred the credit card company could claw back that money. What would have happened if that had gone ahead? There was not only the cost of the sale that we would have lost; we would have ended up paying the freight as well; plus there would have been a charge-back fee from the credit card company. This can happen up to two years after.
Fortunately, something twigged and I was able to make a few telephone calls to some of the banks, and someone advised me that this credit card transaction, even though we had the money in our account, may not have been a legitimate sale. So we held up the shipping, only to find out that that was exactly the case—it was a fraudulent transaction. The people at the banks I spoke to at the time said, 'This happens to hundreds, if not thousands, of merchants in this country.' They get caught in this fraud, because that is an additional risk that they have through accepting a credit card. With all things, that risk must be able to be priced. So I hope, when the Reserve Bank or the ACCC sit down and look at what they determine as an excessive charge, they allow the merchant to make a provision for the risk they face that they will have a charge-back against that transaction.
Thirdly, there is the issue of price discrimination. We know that, unfortunately, despite a long argument by the forces of good working for small business, we have been unable to create an effective law against anticompetitive price discrimination in our Competition and Consumer Act. What can happen is that a customer can walk into a shopping centre, go into one of the larger retailers, make a transaction with their credit card and then go into a smaller competitor, buy exactly the same goods at the same price and run it through an identical machine—it is all electronic—but the small business is charged higher fees. So it could very well be that a small merchant might decide, if he finds he is a victim of anticompetitive price discrimination by one of the credit card companies, to put a higher surcharge on that credit card company as a way of retaliating and encouraging consumers to use a credit card company that is not engaging in anticompetitive price discrimination. This legislation would prohibit it.
For those reasons, I had some concerns about this legislation. However, what got me over the line was the fact that we also have in our Competition and Consumer Act something that is very important in our free-market system: provisions against misleading or deceptive conduct. When anyone in trade or commerce engages in misleading or deceptive conduct, there is a specific provision in our competition act that prohibits it. It enables such contracts to be ruled invalid or for the courts to rewrite contracts or cancel them altogether if there has been misleading or deceptive conduct.
I noted that, in his second reading speech to the bill, the member for Mitchell, the Assistant Minister to the Treasurer, said—and this is what got me over the line:
Where a merchant charges a customer a card surcharge, that carries with it an irrefutable representation that the merchant is seeking to recover his or her costs.
The point is: if a merchant imposes a charge that is higher than just cost recovery, they are actually misleading the consumer—and that is the only reason that this legislation can be justified. If, as a merchant, you make the representation that you are including a credit card surcharge, it is implied that it is simply a cost-recovery exercise. That is the only reason I can support this legislation. I cannot, in good faith, come in here and support legislation where we, as government, are attempting to put price controls on companies in our free market. History shows that does not work. Even though we may think we are doing a wonderful thing and we may think we are helping the consumer, wherever you put price controls you distort the market and the ultimate loser is the consumer. But, because this legislation goes to those misleading or deceptive conduct provisions of the act, it is legislation that I can support.
With that, I just hope that, when the ACCC or the Reserve Bank sit down and look at the cost to a merchant, they give full consideration to the risk—because there is a real risk for merchants. We have seen that in a recent example: Dick Smith being placed in administration. People purchased Dick Smith gift cards and, if they paid cash, basically they will go to the end of the line with the other unsecured creditors. But if they have bought that gift card by using a credit card, they can go to their credit card company and say that they did not get the goods. The credit card company has the power to claw that money back lawfully from the retailer. So there is a higher risk for any retailer when they accept a credit card from a consumer. If we believe in the price mechanism and the free market, we must allow those merchants, those retailers, to price that risk in when they set their credit card fees. This is most important in our price system. As I said, I hope that the ACCC and the Reserve Bank sit down and look at the different risk profiles.
The other reason I can support this legislation is that most of the examples cited involve the airline and the taxi industries. They are not necessarily industries where clawbacks from the credit card companies are a significant issue. It is more where smaller merchants are supplying electronic goods, furniture and other types of goods such as household appliances, jewellery and computers. Such goods are easily disposed of for cash. They have a greater risk profile. So merchants also need to be aware of that. They need to price accurately to determine the risk. Ultimately, we should be leaving all those price decisions up to the individual merchants. But where there is a chance of misleading or deceptive conduct, we need to have legislation. Therefore, I am happy to support this bill.
It is with considerable enthusiasm that I support the Competition and Consumer Amendment (Payment Surcharges) Bill 2015. I think it is very important that, as we move increasingly towards an economy based on the use of credit cards, we ensure that we have some basic consumer protections in place. It is very important that we ensure that consumers, in purchasing an item using a credit card, do not find themselves with an unexpectedly large surcharge.
I do note the comments of the member for Hughes. I have some sympathy with his sentiment. Many of my constituents, as the discussion about this matter has unfolded and as the discussion about the behaviours of banks unfolded through the recent Senate inquiry, have argued that banks should be more heavily regulated and that their interest charges should be regulated. The member for Hughes has expressed his faith in the markets, saying that we do need to have competition and that merchants and banks should be free to set the charges as they wish. In a perfect world, where you are studying economics 101, that might be an appealing idea, but we are all very aware of market failure and of the problem of the increasing concentration of power.
Mr Craig Kelly
Have you been to Venezuela?
I have not. I am waiting for a parliamentary delegation to visit Russia.
Mr Craig Kelly
No—Venezuela. I know you like Russia; they fixed it up. Venezuela was the place.
Yes, they really did. I think Boris Yeltsin did a fabulous job—I mean, creating those oligarchs! How inspired was that! How has that taken that country forward? That is the logical consequence of some of the nonsense that you are talking, member for Hughes. I do not totally disagree with the member for Hughes. I do think it is important that we not overregulate the market. But we need to understand the power of the banks within our economy. The profits that these banks are making! We have the four big banks who, between them, made $29.97 billion in profit in just the last financial year. We have CEOs on extraordinary, mind-boggling remuneration packages. So this is not really a perfect market.
I put it to you, member for Hughes, that you are not concerned about the small business down on Main Street. Small businesses are not charging these avaricious rates of surcharge on their product. These companies are trying to keep themselves competitive. Indeed, we find that it is the big companies that are the issue—those like the taxi industry, until relatively recently, that have a legislated monopoly. It is the airlines. It is where you have a small number of players—entertainment promoters. It is not the small punter, the blue-collar worker, the plumber, the candlestick maker or the seller of clothing among the parties engaging in this avaricious conduct that has to be contained.
I say to the member for Hughes and to others: we need to think about this far more profoundly because we are going to see increasing distortion in our marketplace—and not just in the area of banking. Over the summer vacation I had the opportunity to read the very interesting book . It refers to all of the hype and rhetoric concerning the digital age and how we are going to see the democratisation of business, where anyone sitting in their garage or lounge room will be able to set up their own little business, and to those people who have been the first movers—those people who had that first opportunity and that first moment of genius to leverage off that very substantial public investment that constituted the creation of the internet, the World Wide Web and the computer. That development was the result of public investment and a great deal of scientific and technological collaboration, and the great effort between the 1940s and the late 1960s has largely been privatised.
What we see is that, far from this being the most incredibly democratic processes, that early advantage, that access to scale, that access to the development of algorithms where people are teaching the system to become better and better the more you use it means that it is going to be harder for entirely new entities to break in. Indeed, it is the case when we look at the Googles and the Facebooks and the enormous size of those companies. It is really making it as completely farcical as the member for Hughes's support for the oligarchs of Russia to believe that these are people that are somehow or other going to be engaged in the democratisation of our society.
We will need to keep a very vigilant eye on the developments that are taking place within the digital economy. It is fabulous that we have got the sense that we can have this great burst of innovation—and I am sure we can. But if you look at what is really happening, who really is dominating the digital space? It really is a relatively small number of companies. So, whilst we might have tens of millions of small apps and operations going on—proposals, projects, small offerings—when you look at the bulk of the commercial activity on the net, you will see it is dominated by a very small number of players who have obtained a very ridiculous and, I believe, underserved level of reward.
Of course we understand that we want an energetic, entrepreneurial business world and that people will want to get a return from their creativity, from their hard work and from their energy. I completely and utterly understand that. But instead of that being measured in the millions, that it is now being measured in the billions—and even billions are no longer good enough to satiate the needs of your average digital entrepreneur; we are talking about tens of billions. This is going to then create a much greater role for government to look at the imperfection of the market and to really reconsider some of the language around the ability to attain the joys and benefits of competition, because if we have such a small number of players obviously we do not have competition.
Even in the land of the free that was recognised. After the emergence of the first class, I suppose you might say, of the great robber barons in 19th century United States, we saw a whole series of legislated reforms that came in to claw back on that power. We saw the introduction of antitrust legislation. We saw the introduction of a whole raft of laws that were designed to limit the role of monopoly. We have done the same in Australia through our Trade Practices Act. Some of us would obviously like to see our Trade Practices Act be somewhat stronger than it is, but there is no doubt that the intent is to recognise that there can be market domination, there can be unfair practices and there can be conduct that does need to be scaled back, because the market forces alone are not sufficient to create justice in those circumstances,
Again, I very much support this legislation. We are not about wanting to overregulate, but I think the real trick is, as the legislature, for us to determine where there has been a substantial breakdown in competition and where the result to the bulk of the community is not a good one. That is when we need to make a decision that does not tie us relentlessly to a mantra of 'competition is all good', because we understand that we have structures in our society that are effectively very anticompetitive. We need to be mindful and vigilant of that, constantly analysing our institutions, constantly being aware of the changes that are occurring exponentially in the structure of our economy. With that, thank you.
In this rapidly evolving cashless society, we touch a button and, on an increasingly compact computer device, type in a creditor and an amount to pay them from anywhere in the world and, presto, payment is made. Multiple payments are made if that is what you want to do—and we have not even opened our purse or our wallet, let alone seen the money change hands. From the great Marco Polo's 13th century notes that began to replace gold and silver and then metamorphosed into plastic notes—with Australian ingenuity—to the key currency now presented to shops, tradies and other merchants, a single plastic card now represents the entire worth, and debts, of its holder.
Johannes Gutenberg's printing press, which bought about the mass printing of money, is almost obsolete, with modern-day bank accounts now combining with state-of-the-art online banking facilities. Almost everything we do or think about doing in modern Australia is supported by our financial system. Indeed, the financial system helps us manage our household budgets, holds our savings, provides the credit we might need and, through insurance, also helps us manage some of the risks we face.
Today's credit card symbolises the power of technology, innovation and resilience in commerce and trade. It allows us to pay for drinks or a meal with family and friends with a plastic card, and we can procure the week's groceries and fill our cars with fuel without coins or a handful of Australian made plastic notes. Each month around $45 billion of purchases are processed through more than half a billion card transactions. We can now pay school and university fees, as well as electricity, gas, water, rates, telephone and internet bills, from the comfort of our home or office. We can even get our online banking facilities to pay regular bills automatically without us having to personally handle the transaction at all.
This financial system allows us to buy a new home, pay the mortgage or rent, start a new business venture or even plan for retirement. It offers much promise to make our lives even easier—a faster, easier and more convenient way to manage our personal, household and business affairs. It has the capacity to improve lives and save time for every individual, family and business in Australia every day, every week, every month and every year.
But it also comes at a cost—often hidden and cumulative. The purpose of the Competition and Consumer Amendment (Payment Surcharges) Bill 2015 is to amend the Competition and Consumer Act to establish a legislative and regulatory framework to ban excessive card surcharging and establish the Australian Competition and Consumer Commission as the primary enforcement agency for the ban. To get to this point today, the government held a root and branch examination of Australia's financial system just as we promised to do during the last federal election. This is a very good example of where our government has not simply looked at a problem or sent it to a committee for another review, but instead has used this to inform the legislative and administrative action we are now taking.
The inquiry, which was chaired by Mr David Murray AO, was tasked with making recommendations that would position the financial system to best meet Australia's evolving needs and support economic growth. I welcome this bill as another step forward in protecting the rights and interests of the Australian consumer so as to encourage our financial system to deliver better and more affordable services.
If consumers are overcharged or treated unfairly the losses they incur adversely affect the whole community.
Sadly, many Australians have almost been conditioned to expect to pay increasingly high bank fees—especially those passed on by merchants—because that is what we have always done, year on year. It was an understandable expectation that began when the process and administration of a sale at a local shop was more labour intensive and used technology that came at great expense. The more money you made or spent using a credit card, the more money you paid in transaction fees. But today's transaction fees should better reflect today's banking and finance sector costs. In times of old, we watched our money more carefully as it passed from our wallets to others' hands, and more rigorously scrutinised the cost of services and charges because we could see it, feel it and count it. While many merchants do pass on costs fairly, some intentionally charge many times more than the true cost of accepting a credit card payment.
Out of sight should not mean out of mind. That is why the coalition promised to establish a Financial System Inquiry, and it is why we are making important changes to safeguard the interests of every Australian resident and business. There is no doubt that our financial system needs to be as competitive and affordable as possible, but the economies of scale that accumulate from multiple transactions should help drive down prices, not simply serve as a proxy tax or levy. It is important to recognise that the Murray inquiry found that Australia has a well performing financial system and our government's response will ensure it is the best in the world.
But that does not mean it should be out of reach. The government has listened to the community's concerns and we have taken action. I congratulate the assistant minister for bringing forward this bill and I stand with those in this House who recognise the importance of this sector to drive the Australian economy as well as how it impacts on everyone in a very pervasive way, many times a day. I share the concerns about the abusive practice of excessive surcharge that have been expressed by many people who live and work in my electorate of Ryan. Indeed, of the 6,500 submissions received by the Financial System Inquiry, more than 5,000 related to the opportunistic practice engaged in by some merchants to drive profits through card acceptances.
Given the widespread problem of excessive surcharging, the coalition government is moving to outlaw the rapacious behaviour of a select number of merchants who choose to take advantage of Australian card users. Where a merchant charges a customer a card surcharge they should only recover their real costs. On this issue, the government stands firmly behind Australian consumers. We believe consumers are entitled to a fair deal which limits surcharging to genuine cost recovery. That is why the government is taking action to ensure customers are charged no more than the amount that reflects the true amount of the merchant's costs in accepting that payment. A surcharge will be deemed excessive where it exceeds the costs that merchants are charged by their payment provider for using that payment method.
However, with technological innovation bringing new types of payment methods into the market, maintaining flexibility in the application of this regulatory regime is vital. That is why we will put in place a flexible framework that government and regulators can adjust to changing circumstances. While this bill will provide considerable savings to Australian consumers, the government will not stop merchants from recovering their own costs of accepting cards. However, profiteering by merchants under the guise of cost recovery will not be allowed by this government.
The Australian Competition and Consumer Commission, the ACCC, will be the primary enforcement for banning of excessive surcharging of customers for using a particular payment method. Our financial system is the great enabler for economic growth and a great facilitator for growing business, commerce and trade. Indeed, in an increasingly cashless world, a competitive, innovative and efficient financial system supports the operation of the whole economy. While consumers are always responsible for the consequences of their financial decisions, they should always be treated fairly. The financial services and products they purchase should perform in the way they are led to expect.
I congratulate the assistant minister and the coalition government for listening to the issues, concerns and aspirations of Australian consumers and businesses as well as the concerns of academics and other stakeholders in the banking and finance sector, both here in Australia and overseas. As I said previously, this is a very good example of where the government has not simply acknowledged a problem—or sent it to a committee for another review—but has used it to inform the legislative and administrative solution we are now implementing. I also note that most stakeholders generally approve of the framework outlined in the bill for the ban of excessive surcharging. I commend the bill to the House.
This Competition and Consumer Amendment (Payment Surcharges) Bill 2015 shows that the Turnbull government is a government of not just good intentions but actions. It is unfortunate for Australia that Labor had six years to strengthen our economy but did nothing. In their six years of governance Labor managed to preside over Australia's fastest deterioration of our debt position in modern history. The Australian economy and the Australian people suffered. The effect of Labor's mess is still being felt.
This government is still cleaning up Labor's disastrous mess. We have implemented $3 billion worth of budget repair measures from a total of $4 billion. The Turnbull government is making sensible policy positions, taking Australia's economy from investment in mining to a diverse, innovative and people-driven economy. We are growing confidence, strengthening job growth and improving business conditions. We are removing barriers to ensure policy is agile, nimble and innovative. We are strengthening our nation's finances to secure jobs and growth by opening up trade, boosting innovation and building more infrastructure.
This government will modernise the way we deliver products and services while strengthening the budget. On Sunday, 7 December 2014 the Financial Systems Inquiry's final report was released. This report made evidently clear the pressing issue of Australian consumers being subject to excessive card surcharges. The Financial Systems Inquiry was commissioned to examine how Australia's current financial system could improve in order to meet changing needs as well as examine how best to support and sustain Australia's economic growth.
It is important that Australia's consumers and the Australian economy are afforded an efficient, competitive, prudent and flexible financial system. The report made it blindingly clear that the Australian community holds significant concern regarding card surcharges. The Financial Systems Inquiry received 6,500 submissions, with more than 5,000 related to excessive card surcharges. This government has carefully assessed the Australian community's concerns. We are now delivering our commitment to implement fairer outcomes for Australian consumers.
Whilst I must note that not all are participating in this behaviour, it is certain that Australian consumers have been taken advantage of by particular merchants. The choice that some have made, to abuse this process, is unacceptable. Steps must be taken by this government to ensure an end to this unfair practice. It is essential that the Turnbull government take the necessary steps to protect Australian consumers and ensure the efficiency of the Australian economy. It is also essential that the Australian community have faith in the very system that is essential in the daily functioning of the Australian economy.
It is a fact that Australian consumers pay an exorbitant amount of money in card surcharges every year. At times, surcharges charged by some merchants are far in excess of what could reasonably be considered the costs to merchant. How can this be justified and why are Australian consumers being forced to pay for it? This bill will provide much-needed savings to Australian consumers. Put plainly, Australian consumers should not be paying more than the reasonable cost of the transaction. Importantly, the Competition and Consumer Amendment (Payment Surcharges) Bill 2015 will ban the excessive card surcharging above the merchant's costs. The surcharge will be excessive where it exceeds the amount that the merchant is charged by their payment provided for using that payment method.
The definition of an excessive surcharge has been carefully constructed. This is to ensure that payments are captured if they are purporting to substantially be in the form of a surcharge. This means that when a merchant charges a customer with a card surcharge, for the obvious and unquestionable purpose of covering their costs of accepting the card, they will be subject to the card surcharges set by the Reserve Bank of Australia. The merchant will then be fined should they charge above this amount without legislative cause. No, this does not mean that merchants will be prevented from recovering the costs of processing or accepting cards—rather, it is a resolution that protects a merchant's right to recover their costs of processing.
This resolution also accurately informs the community of the costs of competing forms of payment facilities. It will give a clear picture of how much a merchant is actually charged to the Australian community. Overwhelmingly, this bill focuses on protecting consumers and businesses from being charged unreasonable card surcharges. It is this government's response to the financial systems inquiry that will provide Australian consumers and the Australian economy with necessary protection. This bill is the Turnbull government's response to ensure that Australian consumers are fairly treated. This response will ensure that there is a legislative and regulatory process to ban certain surcharges that exceed the cost of the service to the merchant. However, this bill is ultimately about the Turnbull government taking responsibility to ensure that Australian consumers are protected and delivering on a promise to make Australia an even more nimble and agile cashless economy.
The future is about technology, innovation and change. The Australian consumer gets it, and so, too, does this government, which is why we are putting in place these necessary common-sense protections. Liberals love lowering tariffs and ripping away unnecessary economic barriers. Australian business and productivity will be boosted by this government's ability to remove economic barriers from Australia. The Industry Skills Fund is just one example of this government's commitment to the Australian community to support the transition to the new high-wage, high-value-add economy. Via this fund the government has provided my electorate with skills to be able to compete and be agile in Australia's new economy. We are building a skilled workforce ready for the new technological and structural economic challenges facing our economy. We are making commitments and taking action to prepare Australia to be in the best possible position for the future.
Labor had six years in government to remove economic barriers and to address the issue of excessive card surcharges. In fact, the only credit card issue that Labor concerned itself with was the hard-earned wages of the Health Services Union being illegally wasted away by Craig Thomson; $300,000 was stolen and wasted on the HSU credit card. They were not concerned about the exorbitant amount of money that Australian consumers were spending in unnecessary fees. Nor were they concerned about delivering deficits totalling $191 billion, or leaving a projected $123 billion for this government to clean up. Labor came close to breaking the ACCC with underfunding, which led to unnecessary and inexplicable losses.
This government has sensibly ensured that the Australian economy recovers from Labor's $47 billion deficit. We are also ensuring that Australia is best equipped for a future of change, making sure above all that Australians are secure within an agile and nimble economy. We believe in the training, facilitating and supporting of Australians into an economy that they can take the most out of. We are cleaning up the financial mess left over from the financially disinterested Labor Party. This payment surcharges bill will apply to excessive surcharges which are covered by the Reserve Bank of Australia's Payments System Board standards or the regulations. The Reserve Bank will set the boundaries for the scheme and set the permitted surcharges for most payment types. It is important to also note that the regulations have the ability to determine these matters should that become necessary in the future. The ACCC will be the primary enforcement agency for the ban and will be afforded appropriate enforcement powers under this bill to ensure that the ban is adhered to by all. The ACCC will have the power to require that merchants provide information to explain the cost of their surcharge and to ensure that the merchants comply with such requests. The ACCC will be afforded the power to issue infringement notices to those not adhering to the ban on excess surcharges. This ensures that the ACCC can take action on smaller infringements, providing for timely resolutions, rather than seeking resolutions through the court systems, which can be costly and time consuming.
The infringement notice amount affordable to listed corporations who have breached the ban is 600 penalty units, amounting presently to $108,000. An infringement notice amount for bodies corporate not listed as corporations is 60 penalty units, amounting presently to $10,800. The ACCC also has the power to issue an infringement notice amount of 12 penalty units, presently at $2,160, for persons other than bodies corporate. This extensive list of infringements will ensure efficiency when dealing with breaches of the legislation; $45 billion of purchases are processed through over half a billion card transactions each month is Australia. This figure is staggering and shows the need to ensure that Australian consumers are appropriately protected from card surcharges. It is an important protection for an important daily need for Australian consumers.
This bill has provided a flexible framework throughout which government and regulators can adjust and provide for future changing circumstances. This is particularly important with the development of new technology and payment methods. It is important that this bill be ready for the changes of the future to ensure continuing consumer protection. It is the aim of this bill that Australian consumers be protected from unnecessary and arbitrary card surcharges. Australian consumers must be afforded a fair go. This bill will ensure that surcharging will be limited to genuine cost recovery and will end the practice of some merchants profiting in the name of cost recovery
Australian consumers understand the need of merchants to recover the true costs of a transaction. What Australian consumers do not understand and do not condone is helplessly having the wool pulled over their eyes. Australian consumers do not deserve to pay excessive surcharges for transactions which they work hard to be able to make. This bill will result in the improvement of Australia's payment system by providing efficiency and fairer outcomes for both consumers and business. It will also implement significant and targeted behavioural change throughout Australia. This is necessary to ensure that Australian consumers are given a fair go. It is the Australian way to ensure fair deals for all Australians, and this government is taking action.
US President John F Kennedy stated:
Consumers by definition, include us all. They are the largest economic group, affecting and affected by almost every public and private economic decision.
It is essential, then, that we afford Australian consumers the necessary protections from excessive and unnecessary card surcharges. These tough laws deliver on the Turnbull government's commitment to protecting Australian consumers from excessive card surcharges. This government has worked extremely hard to ensure Australian consumers are given a fair go and to ensure the health and prosperity of the Australian economy. Consumer confidence in the Australian economy is on the rise. Our government is reacting sensibly to ensure the growth of our transitioning economy. We have improved the bottom line over the relevant forward estimates period by $90 billion. It is because of this government's actions that payments are expected to grow at an annual average rate of 1.8 per cent compared to an inherited 2.6 per cent under Labor. The Turnbull government is committed to any economic decisions that are necessary to ensure the growth of our economy and the growth of Australian jobs. This bill is only a small part of this effort but it is an important step in ensuring the protection of Australian consumers.
It gives me great pleasure to speak on this bill. The opposition welcomes this bill. The financial system inquiry looked at this issue in great detail. When it brought down its report, in November 2014, it took a strong stand on surcharging. It recommended that surcharging regulation be introduced and that its application be expanded to ensure that customers using lower cost payment methods would not be overcharged, or surcharged, by allowing more prescriptive limits on this practice. The final report of the inquiry was released in 2014. It was disappointing that it took over a year to get a response to it—in particular, the kinds of things we are discussing in this bill. Having said that, this is a largely common-sense and, in our view, non-controversial recommendation. It will ensure that Australians are not ripped off when using credit cards and it will increase the efficiency of the payments system. It should clarify regulation, enhance competitive neutrality between system providers, improve the efficiency and effectiveness of price signals and reduce the potential for cross-subsidisation between consumers and merchants. The opposition welcomes these aspects.
The issue of payments is fast evolving, and a number of speakers today have reflected on that. There is no doubt that an electronic payment system is good for consumers, merchants and the broader economy. I note the presence in the chamber of the Assistant Minister for Innovation. He and I know that in dealing with start-ups in particular, which are innovating and bringing in new methods of getting things done in this country—liberalising the way the economy works—an efficient payment system is the oil that make sure the wheels of commerce turns smoothly. And being able to adopt those practices and embed them within the systems that are being used by start-ups, which do through the service that they offer have a payments component to them, works efficiently. It is important in reducing costs, in reducing the management and handling of cash and in helping tackle the black economy. Studies have said that the more an electronic payment system is embraced the better it is for an economy and they can see commercial benefits.
I have taken a great interest in this space, and it is important that we do whatever we can to encourage a greater embrace of this. The reason I reflect on this point is that surcharging dents people's confidence in the system. If people believe that electronic payments are just an easy way for someone to take a bigger clip from the ticket on the way through, if they think multiple transactions on a credit card will lead to higher charges, they will resort to cash. So there has been concern for some time that people will be ripped off. They also have a concern that different types of credit cards—be it American Express, MasterCard or Visa—have different surcharge regimes. There was a practice occurring—and people would witness it when they were at the point of sale—of blending. Instead of having the proper pass-through of the charge itself, the cost would be blended and this would actually inflate the cost on individual credit cards. This is a big concern.
I have spent time with most of the credit card players. I have visited Visa and seen their innovation centre in San Francisco. Here in Australia I have spoken with MasterCard. And I have an American Express card as well—as I suspect a number of us here do. So I have experienced all three, and I know the concerns that drive consumers mad when they see those practices occurring. We simply cannot afford to have this continue. That is why it is important that this bill, and the recommendations of the FSI, be given further legs and that we amend the act to include a ban on surcharging itself, allowing the ACCC to take action against corporations and other specified under section 6(2E)of the act that engage in excessive surcharging. A surcharge will be deemed to be excessive if—and only if—the surcharge exceeds the level of surcharging permitted under either a Reserve Bank standard, which covers the kind of payment, or as set out in the regulations. For example, a Reserve Bank standard refers to some fixed amount for a particular payment method or to a specific range of input costs. The amount of the payment surcharge cannot exceed the amount stated or calculated as the permitted surcharge. So there are some good changes there.
When people think of credit cards, they think of the small plastic that sits inside their wallet or purse. In actual fact, there is a rapid evolution occurring right before our eyes where, for example, smartphones themselves can be used as a method of conducting transactions. I am a very big fan of Apple Pay, because of the ease of the system—being able to use that at a point-of-sale terminal, conducting a transaction without even having to reach for a credit card. When you undertake that process, even tellers are amazed at the ease at which that transaction can be conducted. And that is the point: it should be easy and it should be secure. Under the Apple Pay system, you use your thumbprint and a highly individualised mechanism for verifying a payment before proceeding. Being able to use a thumbprint has now allowed people to be able to lift the amount that they can spend through that method. For example, with the type of credit limits that exist on Paywave, people can only conduct a transaction of up to $100 value before going through some verification method, which is usually a pin, because the card companies themselves have moved to a pin-based verification system.
At the consumer electronics show in Las Vegas this year, there was also an announcement by Samsung that this year, through arrangements they have made with two banks, they would be introducing—on the Android platform, quite distinct from iPhone—Samsung Pay to Australia. In fact, Android has been working furiously. From what I understand, it has been able to secure agreement with the big four banks to introduce Android Pay in the first half of this year. However, you can only access Apple Pay through American Express and American Express does, as people well know, charge a higher surcharge. The reason why I mention this is that there has been a delay in introducing this mechanism of payment through smartphones.
The use of mobile technology is taking off exponentially—it is the platform in which broadband-enabled apps are able to undertake a whole range of activities, not the least of which being payments. What has occurred is that Apple and the major banks have been in a major arm wrestle, refusing to agree and cede ground in establishing those payment arrangements that would allow for Apple Pay to be broader than just the AMEX platform. This is something that I have raised in public domains over the last six months and it is something that I am greatly concerned about. I believe, a lot of us believe and the assistant minister believes that the smoother that the payment system is, the more that it is on an electronic platform or a mobile platform, the better it is for a whole host of people—consumers, merchants and the broader economy. This needs to occur.
In the case of Apple, they have, not surprisingly, sought to extract the maximum gain that they can, and the banks have not been willing to cede that. We certainly do need to see a better approach on that system, but it is heartening to see that they have been prepared, in the case of Android, Samsung Pay and other systems that use Android, to cede ground and achieve some movement on that. My bigger concern, longer term, is that it takes too long to get these payment systems in place. The concern there is that the longer it takes, the more frustrating it is for consumers unable to access much more efficient platforms for payment. Certainly, we do not want to see a reversion back to cash. While people do use cash—and I know that there will be traditionalists that hold onto it—there is definitely something to be said about seeing the lower costs flow through for merchants and consumers.
The other obvious concern in all of this is that we do not have an efficient system that ensures a more secure platform. We know that can be the case by moving to this system of payment and so that is certainly one of the things that I have been keen to see. I would definitely be urging the major banks to see what they can do in furthering talks with Apple and others to ensure that these systems are brought into place quickly and that they are much more responsive.
We know that Australians have an appetite to embrace mobile technology a lot faster than most other parts of the world and, in actual fact, we have a tendency to talk ourselves down relative to others. In the US financial system, what is surprising for any Australian visiting and making transactions in that system is the dominance of a cheque-based payment system, which is insane. There is still a paper-based, cheque-based system in place in the US. Paywave was embraced so rapidly here—in fact, it was in the top four markets in the world. There was nowhere that it was embraced as quickly as four markets, of which Australia was one, from what I have been briefed on. Australians do embrace this quickly, but, if you go to the US system, in many instances it is still a cheque-based system. You can imagine, in a country with 250 million people, with the multiple transactions that are undertaken in that economy, to still be reliant on that system instead of an electronic payment system beggars belief.
From our point of view, knowing that Australians are much more willing to use mobile technology, and new payment systems and mechanisms, and knowing that there is a definite appetite and hunger to see this movement occur quickly, for banks and some of the big tech players like Apple to be stuck in a quibble, in an arm wrestle, in the way that they have, where consumers have lost out or been forced to pay higher surcharges as a result, makes no sense to me. The quicker we get this resolved, the better.
But, again, while we might be talking about the new world, while we might be talking about new payment systems, we are still arguing about an old-world mentality that seeks to squeeze as much out of the consumer as possible, through fees. It is the type of thing that we are trying to stamp out under this legislation: a mindset that would try to squeeze extra out of consumers through excessive surcharging. It is simply unacceptable.
Certainly, while I welcome the developments that will emerge out of this legislation and the fact that it will put heat on people who want to engage in excessive surcharging, we still have other fights that we need to undertake and those fights need to ensure that faster embrace of electronic payment systems occurs, and we hope that proceeds into the future.