The Retail Payment System (Ban on Merchant Surcharges) Amendment Bill inserts a new subpart into the Retail Payment System Act 2022 that prohibits merchants from charging payment surcharges in specified circumstances — initially when consumers pay in person using debit or credit cards on EFTPOS, Mastercard, or Visa networks. The amendment defines key terms (including a broad definition of “card” and a technical definition of “card‑present”), creates consumer remedies, and gives the Commerce Commission powers to require corrective action and impose pecuniary penalties.
The change matters because it replaces a permissive, cost‑based surcharging framework in some contexts with an outright ban for common in‑person payment flows. That recalibrates who bears payment acceptance costs, alters compliance and pricing choices for retailers, and adjusts the Commission’s enforcement priorities while leaving the regulator able to define other prohibited circumstances by regulation.
At a Glance
What It Does
The bill adds Subpart 1AA to prohibit merchants from charging a payment surcharge where a consumer makes a card‑present retail payment via an EFTPOS, Mastercard, or Visa network and allows regulations to extend that prohibition to other circumstances. It gives the Commerce Commission powers to issue notices requiring corrective action and to seek pecuniary penalties under the Act’s enforcement framework.
Who It Affects
Retail merchants who accept card payments in person, payment service providers and networks (EFTPOS, Mastercard, Visa), card acquirers and processors, and the Commerce Commission responsible for enforcement; consumers who use card‑present payment methods are the direct beneficiaries.
Why It Matters
The bill narrows when surcharges are permitted and creates an explicit statutory prohibition for the most common in‑person card payments, shifting the regulatory default from cost‑recovery limits to a ban. For compliance officers and payment providers this changes contractual exposure, refund obligations, and operational billing practices; for retailers it changes how payment acceptance costs are recovered.
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What This Bill Actually Does
The bill inserts a new subpart into the Retail Payment System Act that is intended to improve transparency and convenience for consumers by banning merchant surcharges in specified situations. The purpose clause for the new subpart overrides the Act’s broader purpose for these matters, so decisions about the prohibition are to be made with transparency and consumer convenience as the governing aim.
Subpart 1AA establishes the primary prohibition and a package of consequences and enforcement tools. The prohibition applies where a consumer uses a debit or credit card to make a retail payment in person and the transaction is processed via an EFTPOS network, a Mastercard network, or a Visa network.
The statute defines “card” to include physical, digital, and tokenised credentials and sets out a two‑part test for a “card‑present payment method” — the consumer and card must be physically present at the merchant’s point‑of‑sale device and the card must be electronically read by that device. The EFTPOS definition is functionally narrow: it covers debit‑card transactions using swipe/insert, selecting cheque/savings, and a PIN entry sequence.If a merchant breaches the prohibition, the bill creates immediate remedies for consumers and enforcement tools for the Commission.
Contract terms that require a consumer to pay an unlawful surcharge are unenforceable and the underlying contract is treated as providing for repayment of the surcharge to the consumer. The Commerce Commission may issue written notices requiring merchants to remedy non‑compliance within a reasonable period; failure to comply with such a notice or the underlying prohibition exposes a merchant to pecuniary penalties under the Act’s existing penalty scheme.The amendment also restructures the interaction between the prohibition and the Commission’s existing merchant surcharging standards: standards remain the mechanism for regulating permitted surcharges (requiring them to be no more than the cost of payment services), but they do not apply where the statutory prohibition operates.
Finally, the bill lets the Minister make regulations prescribing additional circumstances where surcharges are banned; the Minister must consult the Commission before recommending such regulations and publish reasons with any regulation. The Act comes into force one month after Royal assent.
The Five Things You Need to Know
Contract terms that attempt to pass on an unlawful surcharge are automatically unenforceable and the contract is treated as providing for repayment of the surcharge to the consumer.
The Commerce Commission can issue a written notice requiring specified corrective steps and set a ‘reasonable period’ for compliance; failing to comply with that notice attracts pecuniary penalties.
The definition of ‘card’ expressly covers physical, digital, and tokenised credentials, while ‘card‑present’ requires both the card and consumer to be present and the card to be electronically read by the point‑of‑sale device.
Ministerial regulations may extend the surcharge ban to additional payment methods, products, networks, merchant classes, or other retail payment circumstances, but the Minister must consult the Commission and publish reasons with any such regulations.
The Act takes effect one month after Royal assent.
Section-by-Section Breakdown
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Purpose override and legislative context
These amendments insert references that the new subpart’s purpose displaces the Act’s ordinary purpose in matters covered by the prohibition. Practically, that elevates transparency, certainty, and convenience for consumers as the controlling statutory objective whenever Subpart 1AA applies — an important interpretive signal for the Commission and the Minister when exercising powers tied to this subpart.
Purpose of the surcharge prohibition
Section 28A states that prohibiting surcharges in certain cases is in the public interest for transparency, certainty and convenience. By making that purpose operate in place of the Act’s general purpose for these cases, the bill narrows the policy lens: regulatory decisions about surcharges covered by the subpart must prioritize consumer clarity over other objectives that might otherwise guide payments policy.
Scope and technical definition of the prohibition
Section 28B sets the initial statutory prohibition on surcharges for card‑present retail payments processed over EFTPOS, Mastercard and Visa networks and allows regulations to add other prescribed circumstances. The provision contains several technical definitions — notably that ‘card’ includes tokenised/digital credentials and that ‘card‑present’ requires both physical presence and electronic reading by the merchant’s POS device — and a narrow, functional description of EFTPOS debit flows (swipe/insert, select cheque/savings, enter PIN). These definitions determine which modern payment flows fall inside or outside the ban and matter for borderline cases like mobile wallet tap‑to‑pay or unattended terminals.
Consumer remedies, penalties, and corrective notices
Section 28C gives consumers immediate civil relief by rendering surcharge clauses unenforceable and treating contracts as providing for repayment. Sections 28D and 28E integrate the prohibition into the Act’s enforcement architecture: the Commission can issue notices ordering corrective action within a reasonable period, and non‑compliance with either the prohibition or a corrective notice exposes merchants to pecuniary penalties under the Act’s penalty subpart. The arrangements combine consumer restitution with administrative enforcement.
Interaction with merchant surcharging standards and penalty rules
The bill revises the purpose of the existing standards subpart to emphasize that, where the statutory prohibition applies, merchant surcharging standards do not. It also updates amendment and revocation rules to allow standards to be changed for consistency with new regulations, and expands the scope of pecuniary penalty orders to cover contraventions of the new prohibition and related involvement. These changes prevent overlap and conflict between a statutory ban and regulator‑issued standards, while ensuring the Commission’s penalty toolkit reaches both standards breaches and outright prohibitions.
Regulatory route to extend the prohibition
The regulations clause permits the Minister to prescribe additional circumstances in which surcharges are banned (for example, particular online card flows, payment products, networks, or merchant classes). It imposes an added consultation requirement — the Minister must consult the Commission and have regard to the subpart purpose and relevant standards — and requires publication of the Minister’s reasons when regulations are made. That combination creates a transparent but flexible mechanism to extend the ban without further primary legislation.
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Who Benefits
- Consumers who pay in person by card — they gain clearer pricing, an explicit right to repayment if charged an unlawful surcharge, and protection against surprise fees at checkout.
- Consumers using tokenised or digital card credentials at physical terminals — the bill’s broad definition of ‘card’ brings many modern wallet and tokenised flows within the prohibition’s protective scope.
- Merchants that already absorb card acceptance costs and advertise ‘no surcharge’ — they gain a competitive parity advantage when other retailers are required to follow the same rule, reducing pressure to use surcharging as a price tactic.
- The Commerce Commission — gains statutory clarity and a tightened enforcement mandate in respect of certain payment flows, including explicit notice powers and integration with existing pecuniary penalty procedures.
Who Bears the Cost
- Retail merchants who currently pass card acceptance fees to in‑person customers — they face direct compliance burdens, potential repayment liabilities, and may need to reallocate costs into base prices or absorb them.
- Small and medium‑sized retailers with thin margins and limited pricing flexibility — likely to feel the biggest squeeze from a prohibition because surcharging is an immediate cost‑recovery tool; compliance monitoring also imposes admin costs.
- Acquirers, processors and potentially card networks — these participants may see changes in fee recovery dynamics, contractual pass‑throughs, and disputes, and may need to revise merchant contracts and billing systems.
- The Commerce Commission and Ministry officials — enforcement, monitoring, consultation and drafting of targeted regulations require additional resourcing and operational capacity.
Key Issues
The Core Tension
The central dilemma is between consumer‑facing transparency and merchants’ ability to recover payment‑acceptance costs: the ban eliminates a visible surcharge that some consumers view as unfair, but it forces merchants and payment providers to reallocate costs elsewhere and imposes repayment and compliance obligations that can be administratively and financially burdensome.
The bill raises several practical and policy trade‑offs. First, defining and policing ‘card‑present’ is technically tricky: modern tap‑to‑pay, mobile wallets, and tokenised credentials blur the line between ‘present’ and ‘not present’, and the statutory test — requiring both physical presence and electronic reading by a POS device — will generate borderline cases that need secondary guidance or regulatory clarification.
Second, making surcharge clauses unenforceable and requiring repayment creates compliance and financial exposure for merchants, but leaves open how restitution is operationalised (claims processes, timelines, and evidentiary standards).
A second tension is the potential for cost‑shifting. Banning visible surcharges improves apparent transparency, but merchants may respond by raising headline prices, introducing minimum spend rules, or changing service models — outcomes that reduce price visibility in a different way.
The ability to extend the ban by regulation is necessary for flexibility but risks ad hoc rule‑making and uncertainty for payment providers unless the Minister and Commission provide clear, predictable criteria and draft regulations with published reasons. Finally, enforcement practicality matters: the Commission’s notice and penalty powers exist on paper, but effective deterrence will depend on monitoring capacity, complaint handling, and the clarity of secondary standards and guidance to avoid litigation over the scope of the prohibition.
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