The ACT Party is proposing a change to the Government's proposed surcharge ban, which it says would make the ban more targeted by allowing businesses offering a fee-free alternative to customers, such as cash or EFTPOS , to be able to surcharge customers.
On Friday ACT’s Commerce and Consumer Affairs spokesperson Parmjeet Parmar said she had written to the Chairman of the Finance and Expenditure Committee and Commerce and Consumer Affairs Minister Scott Simpson about a proposed targeted amendment to the Retail Payment System (Ban on Merchant Surcharges) Amendment Bill.
“We need to make sure that in trying to protect consumers, we don’t end up unintentionally making them worse off or unfairly punishing businesses,” Parmar says.
While Parmar says the principle behind the Government’s proposed surcharge ban can be justified especially when a business offers no alternative to contactless payments that don’t incur a fee, “in situations where an alternative option is available, a business that wishes to do so should be able to recoup the costs of providing a more convenient form of payment”.
“If retailers are forced to absorb every payment fee without being able to offer alternatives, some may stop offering contactless or credit card options altogether – or simply raise prices for everyone.”
“Consumers expect the price they see advertised to be the price they pay. Where there’s no free alternative, banning the surcharge makes sense for transparency. But where there is a choice, it’s wrong to punish businesses for offering convenience," Parmar says.
“Removing all flexibility would mean higher prices for everyone, less payment innovation, and even tighter margins for small retailers. Regulation should promote choice and transparency – not crush them.”
But Simpson says the proposal from his coalition partner would, in his opinion; “worsen and over-complicate the current issues we face in our retail payment systems”.
“It is my belief that the price on the shelf should be the price at the checkout.”
The Government has been steadfast in its approach to the Bill with Simpson saying on Friday;" ultimately, Cabinet has already agreed to the Bill and we intend to progress it.”
In July, the Government announced it would be introducing the Bill. If given the green light, this Bill would see a surcharge ban in place by May 2026 or earlier.
While there’s been support for the Bill from consumer advocacy group Consumer NZ and business lobby group BusinessNZ, there have been critics, as well back and forth between Simpson and business groups about the proposed surcharge Bill.
The country's lobby group for retailers Retail NZ said on Tuesday that the Bill was "poorly targeted, rushed and risks significant unintended consequences". In response, Simpson said: "Retail NZ have overinflated the cost to retailers and consumers in this change.”
Flexibility
Retail NZ chief executive Carolyn Young says ACT’s proposal enables businesses to continue to decide on what is best for them, gives consumers choice and provides flexibility.
Young says Retail NZ would be letting the Finance and Expenditure Committee know it would support this amendment.
The Finance and Expenditure Committee will meet next Wednesday for private sessions, with one of those sessions covering the Retail Payment System (Ban on Merchant Surcharges) Amendment Bill.
“Retailers continue to face strong headwinds as low consumer confidence continues … Many retailers are re-evaluating how they will price and process payments,” Young says.
And this is during a time, Young says, where a Retail NZ member described the last three months as the toughest sales they’ve had for their business in the last eight years.
It was reasonable to assume that if a business was not going to surcharge that they may have to increase their pricing, Young says.
“The challenge of course with that is the way the structure works is that if you do that, unless you implement a discount for cash and EFTPOs, everyone pays more.”
Once prices are increased, the cost of the transaction is hidden as not all costs would happen equally, Young says.
“In a smaller store where your price point is lower, the increase will be large - probably larger than the cost of the fee. If you think of small items, something that’s $2 or $1.50 - you can’t have a cash transaction that’s $1.52 - you’re going to increase it to $1.60 because that’s where the transaction point is for cash,” Young says.
“People round up, they’re not going to round down when they’re trying to cover their costs … It is not as transparent for people."
‘We intend to progress it’
However, Simpson says surcharging is an annoyance for customers and an inconvenience at the point of sale, which is why the Government's moving to ban them entirely.
“The cost of these surcharges to consumers is $150 million a year, with $65 million of that being over and beyond what is reasonable cost recovery.”
Simpson says the decision to ban surcharges is on the back of the Commerce Commission’s decision to reduce interchange fees, something he has spoken about previously when it comes to the surcharge ban.
Issuers of Mastercard and Visa cards - usually banks - receive an interchange fee every time someone uses their card to pay for something.
Interchange fees make up about 60% of merchant service fees, according to the Commerce Commission, which also says it costs New Zealand businesses around $1 billion a year to accept Visa and Mastercard payments.
The Commission said in July that it determined these costs were too high and had acted to reduce these costs by $90 million a year.
Prime Minister Christopher Luxon has previously chimed into the discussion, telling media the move was around transparency.
"We've got a value set in New Zealand which is we have very transparent pricing.
"We don't want to see a growth in surcharges and other add-ons, we want to be able to say the price you see is the price you are going to pay.”
The United Kingdom and the European Union have a surcharge ban, and the Reserve Bank of Australia reached a preliminary view that it would be in the public interest to remove surcharges on EFTPOS, Mastercard and Visa cards.
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