ASIC takes action against ALDI on credit card and contactless payment surcharges
German supermarket group ALDI has undertaken to improve signage and other point-of-sale communication about the disclosure of credit card surcharges in its Australian supermarkets following action by the Australian Securities and Investments Commission (ASIC).
ASIC was concerned that ALDI did not:
- consistently disclose in all of its stores that there was a 0.5 per cent surcharge for consumers paying by credit card, and
- specifically disclose that transactions made using ‘tap and go’ contactless payment systems were also subject to the 0.5 per cent surcharge, which applies in ALDI stores where either a credit card or debit card is used.
Under the Australian Securities and Investments Commission Act 2001 (ASIC Act), a failure to adequately disclose surcharges, or creating the impression that surcharges do not apply, may be misleading or deceptive.
An ASIC review of signage in a select number of ALDI supermarkets found that the 0.5 per cent credit card surcharge was disclosed in some stores by a sign above the registers and, in others, by a sticker at the registers. In two stores, there were no signs or stickers.
For credit card payments where a PIN or signature is used, disclosure of the 0.5 per cent surcharge is made on the credit card terminal screen after customers insert or swipe their card to pay for their purchase. ASIC considered that this was too late, particularly in stores where there was no other disclosure.
ASIC was also concerned that for all contactless payment transactions, which are currently treated as credit card transactions for all merchants, there was no specific disclosure at all in ALDI stores that these transactions also attract the 0.5 per cent surcharge irrespective of whether customers used a debit or credit card.
ALDI to improve signage and communication about surcharges
In response to ASIC’s concerns, ALDI is introducing a number of measures to improve disclosure of the 0.5 per cent surcharge across all of its stores, including improved signage about the 0.5 per cent surcharge in stores (including at the entrance to the store and at the registers), and further educating its cashiers to communicate the surcharge to customers before finalisation of the transaction.
ASIC’s Deputy Chairman Peter Kell welcomed these improvements and reiterated the need for merchants to clearly disclose any credit card surcharges.
“Merchants need to be transparent about fees and charges where credit card surcharges apply so that consumers can consider using other payment methods without any additional costs,” Mr Kell said. “For example, at ALDI stores, payment by EFTPOS by selecting the ‘savings’ or ‘cheque’ option does not attract a surcharge,” he said.
“Consumers should also be mindful that payments by contactless or “tap and go” cards are currently treated as credit card transactions, meaning that fees may apply where there are surcharges in place, even where they are using a debit card,” Mr Kell said. “We urge merchants to ensure consumers are aware of any surcharges that may apply for payments using these cards’, he said.
ASIC acknowledged ALDI’s co-operation in the matter.
Background to retailer surcharges
The Reserve Bank of Australia is responsible for payment systems, and has agreements in place with credit card schemes regarding credit card surcharges. In 2003, the removal of ‘no surcharging’ rules allowed merchants to pass on the cost of credit and scheme debit card transactions to their customers via a surcharge. The standards made under the Payment Systems (Regulation) Act 1998 allow card scheme rules to limit surcharges to the reasonable cost of card acceptance.
ASIC has particular responsibility for financial services, including where claims made about credit card surcharges are false or misleading or where there is inaccurate or insufficient disclosure of surcharges. There is a general prohibition against misleading or deceptive conduct under the ASIC Act.
Both debit and credit cards with embedded radio frequency technology can be used with contactless payment systems, which allow transactions under $100 to be paid for by a tap or wave of the card. However, such transactions are currently processed as ‘credit’ transactions, even where a debit card is used.
ASIC noted that it does not have the power to enforce any card scheme rules which might limit surcharging.