Eleventh hour attempt by business groups to convince government not to ban surcharging, suggest capping them instead

Business lobby groups are asking the Government not to go ahead with its proposed blanket ban on surcharges, and instead cap them.

Retail NZ, and chambers of commerce including the Auckland Business Chamber, are suggesting the Government cap the surcharge on debit cards at 0.5%, and cap the surcharge on personal domestic credit cards at 1%.

The ban would apply to surcharges on in-store EFTPOS, Visa, and Mastercard debit and credit payments. At the moment no law prevents merchants from setting surcharges to recover their costs for accepting payments.

The business groups say the Government's proposed ban, via the Retail Payment System (Ban on Merchant Surcharges) Amendment Bill, would unfairly shift costs onto all customers, including those using low-cost payment methods such as EFTPOS, and hit small and medium businesses hard.

"With 97% of New Zealand businesses being SMEs and most operating on thin margins, the impacts would be significant."

In a LinkedIn post Auckland Business Chamber and former National Party leader Simon Bridges said his; "reading of the tea leaves tells me the Government isn’t going to drop the Bill or go with ACT’s amendment."

The proposal being put forward by the business lobby groups is; "potentially a sensible sweet spot, that would address legitimate concerns around excessive surcharges, give consumers certainty, and continue to allow businesses to recover costs from in-person transactions," says Bridges.

In its report on the Bill, Parliament's Finance and Expenditure Committee notes currently merchants are permitted to pass surcharges on to customers who choose to pay using a method that's more expensive for the merchant to offer. The Commerce Commission can issue merchant surcharging standards to ensure surcharges are no more than the cost to the merchant of accepting that payment method, but has not yet done so.

"Merchant surcharges often apply to credit card and contactless debit card transactions, generally ranging from 0.7% to 2% The Commerce Commission estimates that consumers pay up to $150 million in payment surcharges each year, of which an estimated $45 million to $65 million likely exceeds merchants’ reasonable costs. On a per-transaction basis, for the use of electronic cards in New Zealand, this means consumers are paying around 3 cents per transaction in surcharges that exceed merchants’ reasonable costs," the Committee says.

The Committee recommends by majority the Bill be passed. Its report on the Bill is here. And you can see more on this issue here and here.

Below is the press release from the business lobby groups.

Business groups propose alternative solution to surcharge ban

Retail NZ, the Auckland Business Chamber and Chambers of Commerce across the country are urging the Government to reconsider its proposed blanket ban on merchant surcharges and instead adopt a fair, workable solution that protects consumers while safeguarding business viability.

The organisations say a ban would unfairly shift costs onto all customers, including those using low-cost payment methods like EFTPOS, and would hit small and medium businesses particularly hard. With 97 percent of New Zealand businesses being SMEs and most operating on thin margins, the impacts would be significant.

They are proposing:

• Cap the surcharge on debit cards at 0.5 percent
• Cap the surcharge on personal domestic credit cards at 1 percent

Retail NZ Chief Executive Carolyn Young says a blanket ban is a blunt tool that will damage both consumers and businesses.

“Removing the ability to recover legitimate payment processing costs will force retailers to increase prices across the board,” Young says. “That is bad for consumers, bad for businesses and bad for innovation. Sensible caps rein in excessive surcharging while allowing retailers to recover genuine costs. We need smart regulation, not knee-jerk bans.”

Auckland Business Chamber CEO Simon Bridges says capped surcharges remain a balanced and practical alternative.

“Our members are strongly opposed to a ban because it pushes costs onto all customers in non-transparent ways,” Bridges says. “Reasonable caps protect consumers, provide certainty and avoid the unintended mess a blanket prohibition would create.”

Waikato Chamber of Commerce Chief Executive Don Good says removing surcharges entirely would put additional pressure on already stressed SMEs.

“Small and medium businesses cannot absorb yet another layer of cost,” Good says. “Caps acknowledge the real transaction costs these businesses face while preventing excessive fees. It is the right balance.”

Sharon Fifield, Chief Executive of the Queenstown Business Chamber of Commerce, says the issue is especially pressing in sectors and regions heavily reliant on card payments.

“In regions such as Queenstown, where card payments make up a large share of transactions for hospitality and tourism operators, a ban would have swift repercussions,” Fifield says.  “A cap is a constructive, workable solution that maintains fairness for both consumers and businesses.”

The groups say proposed interchange fee caps coming into effect on 1 December will already reduce costs for merchants, and that the surcharge cap proposal complements those changes while allowing FinTech and Open Banking providers to grow and compete, as these platforms do not allow surcharging.

Further consideration needs to be given to other transactions via the Visa and Mastercard networks including foreign issued cards, and commercial debit and credit cards whose fees are significantly higher for merchants than personal cards.

They are calling on the Government to engage with industry immediately to implement practical caps rather than pushing through a policy that will have damaging unintended consequences.

Below is a LinkedIn post from the Auckland Business Chamber's Simon Bridges.