Hi Everyone,
A little background: I work for a small business that use eftpos machine on site from one of the big 4 banks since 1997. Back then the company agreed to 3% per transaction value.
In 2016, our current bookkeeper (she works at other businesses too) which we had just employed notified us that we've been charged between 4-5% to process card transactions (Visa & Mastercard) which is high considering the market rate between 1-2%. I then went to our records and found statements as far back as 2009. Between 2009-2016 we had been charged 4.6% on average. The difference between 4.6% and 3% we agreed amount to around $20k (not counting interest).
So I contacted our bank and explained the situation. The person I spoke too say it is indeed excessive to get charged that much and then she put us into their current merchant service plan (1.5% flat) and she would see what see can do in regards to get some refund to us. Later on she got back to me and said the bank had been correct in applying the merchant service charges. We then contacted Financial Ombudsman and see what they can do.
The monthly statements we've been receiving state the Merchant Fees for the month with the breakdown of transaction (the 2nd page says the % charged). This our weak point, the bank did state the % they charged us but our previous bookkeeper never mention anything and not until we had a new bookkeeper, she pointed out immediately. I know as a business owner, you are supposed to be aware after your own financials, but my boss argued that the bank never sent him a notification letter when they increased the rate from 3% like when banks increased your mortgage rate, they will send you a notification letter and will not just simply increased the rate and expect you to notice from the statement.
I checked 3 out of big 4 banks and they were charging between 1-2% depending on the card in 2010 including our own bank based on the statement from another small business that our bookkeeper manages. So it looks like when the rate increased from 3% that we agreed in 1997, the bank increased our rate but when the rate went down, the bank did nothing.
I tried to check if there is any legislation that limit how much bank can charged us and the most relevant legislation I could find is the "Payment System Amendment Bill 2005). But it doesn't deal specifically with Merchant Service Fees but deal with interchange fees between banks to control excessive bank charges on credit card transactions by introducing a cost-based maximum interchange fee that could be charged.
The RBA addressed the credit card interchange fee issue in three main ways. It permitted merchants to pass on any credit card fees to consumers and allowed new credit card issuers to access the market. However, for present purposes the important change was the introduction of a cost-based maximum interchange fee that could be charged. The standard interchange fee covers costs and a reasonable return to the bank. The RBA announced the new lower fees that were to apply from 31 October 2003.4 As a result banks’ income from MERCHANT SERVICE FEES fell from $1.837 billion in 2003 to $1.522 billion in 2004. So my understanding is that Merchant services fee is charged by bank based on the interchange fee.
The other argument we are trying to make is business owner is expected to only pass their merchant services fee as "credit card surcharge" to the customers (this became law recently, before that some business were charging their customers more that their cost). So if we got charged by our provider between 4-5%, how can we charge those rates to our customers? I've never seen in Australia since 2005 at least that someone charge me 4-5% when I paid by credit card.
I am not sure if the ombudsman will rule in our favor simply because they did say the rates they were charging. Then again they never sent us a "notification letter" of a rate increase (not sure if they need to do this by law). If anyone would be able to point out relevant & current legislation that can support our case, that would be great. Thank you in advance and for reading this long post.
Why would you go to Fair Trading instead of FOS?