The Commerce Commission has persuaded phone company 2degrees to cut its credit card surcharge, but its competitor One NZ is refusing to budge.
First it was travel and ticketing companies, then councils. Now the Commerce Commission is turning the screws on the big telcos for over-the-top credit card surcharges.
Spark charges just 0.6 percent on card payments, but its competitors' charges are much higher. On being approached by the commission, 2degrees has promised to cut its card surcharge from 1.75 to 1 percent later this year.
But not One NZ – the telco formerly known as Vodafone is sticking to its relatively high 2 percent surcharge. "Our surcharge is set at an appropriate level reflecting the costs we face from credit card companies," says spokesperson Conor Roberts. "We’ll continue to review the level to ensure it’s set fairly."
READ MORE: * Local councils review big card payment surcharges on ratepayers * Jetstar offers to meet with Commerce Commission to discuss booking fees * Shoppers warned against paying more than 3% card surcharges
The Government has changed the law to empower the commission to first encourage companies to charge less – and if that fails, then to take enforcement action. In other words, commission chair Dr John Small speaks softly but carries a big stick.
At 2degrees, spokesperson Quentin Reade acknowledges the commission is trying to make fees fair and transparent. "We challenged ourselves to do what we can here to help consumers," he says.
"We are hopeful Kiwis see a reduction in fees as a fair and clear way for businesses to operate when faced with external bank charges. The fees we pay remain the same, we have just reduced what we charge."
"We know that the Commerce Commission will use its powers to regulate if there is not a real change in behaviour here. As has been seen recently, the Commerce Commission is not afraid to use the powers it has where needed." – Duncan Webb, Commerce Minister
Newsroom reported in June that the commission had written to airlines, telecommunications companies, ticketing and parking bodies, and local authorities. A Newsroom survey identified at least 17 local councils charging above the odds – 2 percent or more on card transactions.
Matamata-Piako District Council's surcharge was the highest disclosed, at 3.205 percent – though some councils don't disclose their surcharges online and didn't replied to questions.
Matamata didn't even wait for a threatening letter from the Commerce Commission; when told by Newsroom that its surcharges were at the top end, it committed to lower them.
Jenni Cochrane is in charge of digital services at Matamata-Piako District Council. The council uses third party provider Flo2Cash as its payment gateway, but that will change next month.
"We are currently in the process of shifting our online services to a different platform," she says this week. "This shift is about improving efficiency in how we handle and process transactions online and was underway before we learned of the Commerce Commission reports. However, one of our considerations in selecting a provider was the lower merchant fee."
Now, bigger councils are following suit. This week, Auckland Council reduced its in-person average surcharge for credit and contactless debit from 1.75 to 0.67 percent.
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Commerce Minister Duncan Webb says the spate of companies and councils reducing their surcharges shows the Commerce Commission is doing its job effectively.
"The Commission has the powers to impose rules – and this indicates that having those kinds of powers works to encourage better behaviour," he tells Newsroom. "If the Commerce Commission didn’t have those powers, I’m sure the results we’re seeing would look very different."
He adds: "We know that the Commerce Commission will use its powers to regulate if there is not a real change in behaviour here. As has been seen recently, the Commerce Commission is not afraid to use the powers it has where needed."
Auckland Council's group treasurer John Bishop says they've been working with the Commerce Commission to address concerns raised over payment surcharges.
"We have reviewed our charges and responded in an appropriate manner," he says. "The surcharge for in-person credit card payments is managed by the council and has been reduced to 0.67 percent to reflect the actual additional costs incurred by the council for credit card payments.
He says convenience fees for online card payments are determined by ASB, the council's bank. "These remain at 1.75 percent and we have requested the bank review these and provide transparency on the charge."
Card surcharges
Dunedin City Council had already reduced its surcharge from 1.80 to to 1.35 percent before receiving a letter from the Commerce Commission; now it has committed to reviewing that fee again next month.
New Plymouth District Council will now absorb the cost of its merchant fees and not pass the fee on to customers. So too Hutt City Council, which has ended a contract with its bank to provide a convenience fee service. Now, the council is absorbing the fee charged by its bank rather than passing it on to ratepayers.
The Hutt's chief financial officer Jenny Livschitz says ratepayers will no longer incur additional convenience fees when they pay rates by credit card. "That decision was made as part of a broader review of our payment practices for services provided by Council," she says. "It is not appropriate for Council to comment on the legitimacy of the Commerce Commission’s concerns."
Other councils have been reluctant to reduce their charges. When approached by the commission, Wellington City Council disclosed a mixed surcharge model depending on the service its customers use. The commission chair says they're "still engaging" with Wellington City Council.
In other sectors, too, change is slow. Jackie Antas, vice-president of communications for Ticketmaster in the Asia-Pacific, promised to answer questions then went to ground. And an anonymous Ticketek spokesperson, also in Australia, would say only that the company is in the process of revising its fees for credit card payments.
Air NZ and Jetstar both defended their existing surcharges. James Hancock, Jetstar's senior manager for external communications, provided an unattributed statement: "We don’t have a surcharge for using a credit card, but we do have a booking and service fee," the statement said.
Air NZ chief financial officer Richard Thomson says the money the airline collects in card payment fees is less than the merchant service fees it pays its bank. "We do charge card payment fees on a simple fixed fee basis for each of domestic, short haul international and long-haul international routes," he says.
"The fixed fee structure offers a simple model that customers can easily understand and the fee model is reassessed regularly. It is transparent and allows customers to easily predict the additional cost of using a credit or debit card regardless of the total amount of their airfare, making it easier for customers to budget and plan the costs of their travel."
By contrast, he says a percentage-based surcharge would vary widely depending on the amount of the fare purchased. "To avoid paying these types of fees at all, customers can pay using various other methods including the online payment tool POLi, Airpoints Dollars, or cash if booking through a travel agent."
This week, the Commerce Commission issued an open letter detailing the mixed responses from big corporates and councils. “We think it’s important to clearly set our expectations of businesses," says Dr Small. "Our intent is not to promote or discourage surcharging but to focus on ensuring that where merchants do surcharge, that they do so at no more than the cost of accepting the payment."
“We are particularly pleased to see those who have reviewed and are reducing their surcharges – including 2degrees who intends to reduce its surcharge from 1.75 to 1 percent later this year, as well as some councils who are reviewing and reducing surcharges for rates bills and other services. This is a win for consumers."
But he issued a reminder to those companies and councils that remain recalcitrant: “We are yet to determine whether regulation in this area is necessary."
