New South Wales government agencies have illegally charged people about $144m in merchant fees on an estimated 92m credit card transactions for services such as licence renewals, car registrations and fine repayments since 2016.
The finance minister, Courtney Houssos, on Wednesday said the government had referred the issue to the NSW ombudsman for an investigation into “possible serious maladministration” after the state auditor general alerted it to the issue in July.
The state’s corruption watchdog has also been informed.
Houssos said the surcharges had been passed on to tens of millions of customers despite “repeated legal advice” during the former Coalition government’s term that Revenue NSW and Service NSW could not lawfully charge merchant fees.
“I find these revelations extremely concerning, and I can’t see how there is an excuse for a government [agency] that was repeatedly advised that activity was unlawful and to continue to do that,” she said.
She said that due to a longstanding practice of new governments not being given access to advice provided to previous governments, it was impossible at this stage to say who within the previous government was informed of the issue and when.
According to the government, an average individual will have been affected by about $30, but for some, it could be more. Houssos and the customer services minister, Jihad Dib, would not commit to reimbursing residents, but said it was being looked at.
The NSW treasury had directed the agencies to recover the cost of merchant fees in 2012, but the Crown Solicitor’s Office between February 2016 and December 2022 advised that the payments were unlawful, a government statement said.
The secretary of the Department of Customer Services, Graeme Head, has referred the matter to the Independent Commission Against Corruption, the statement said, “noting the apparent failure to act on the 2016 crown solicitor’s advice”.
Dib said he was “absolutely flabbergasted” when the revelations came to light and that there were “a lot of people with questions to answer here”.
“Whilst we’re not pointing fingers, we just want to know very clearly…. how did this happen, why did it happen and why did it continue?” he said.
Houssos said that although most government transactions took place through Service NSW, every department had been instructed to report to Treasury by 30 November on whether they charge merchant fees and if they have the legal authority to do so.
A taskforce had stopped merchant fees being charged directly by Revenue NSW and the Rental Bond Board, and on more than 80% of Service NSW transactions. Dib said the goal was to turn off all payments in the next couple of weeks.
The government said the fees had been switched off for more than 90% of online payments, including the top 12 Service NSW transactions, with the taskforce working to urgently stop any remaining surcharges.
Former NSW finance minister Damien Tudehope on Wednesday said he was never informed of issues relating to merchant fees while he was serving as a minister in the then Coalition government.
“I don’t recall ever receiving any advice that the passing on of merchant fees by Service NSW was illegal,” he said.
“I am not denying that it exists but I don’t recall ever seeing any such advice. If I had … I would have raised it immediately.”
He called on the Minns government to refund affected residents urgently.
The opposition leader, Mark Speakman, who served as the attorney general in the previous government, said he was first made aware of the issue on Wednesday morning.
The opposition’s customer service spokesperson, James Griffin, said he had attempted to contact the former minister in charge of Service NSW, Victor Dominello, but was yet to make contact at 11am on Wednesday.
Typical surcharges on Service NSW transactions included 30 cents for a 1-year licence renewal, 29 cents for a marriage certificate and $1.92 to renew registration for a small car such as a Toyota Corolla, according to the government statement.
The average surcharge on a Revenue NSW payment in 2023-24 was $0.92.
People who have been charged fees are encouraged to register for updates on the government’s response at www.service.nsw.gov.au or by calling Service NSW on 13 77 88.
