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The state authorities in New South Wales have launched an urgent response after it was revealed that multiple government agencies had unlawfully charged merchant fee surcharges on millions of transactions.
A minister in the state government has said that it is the “immediate priority” of the Labor-led NSW to “stop these charges as quickly as possible”, after it emerged that more than 92m card transactions across Service NSW and Revenue NSW incurred surcharges, despite repeated legal advice warning against the practice during the previous administration.
“It is deeply concerning that this practice has been ongoing, despite legal concerns being raised,” said Jihad Dib, minister for customer service and digital government.
Dib acknowledged that although the individual amounts typically charged may appear to be small, they have still been charged unlawfully. “The community rightfully deserves an explanation about how this was allowed to continue for so long under the previous government.”
The intervention from the NSW government comes after the Reserve Bank of Australia (RBA) opened a new review into retail payments regulation, in a move that could bring an end to surcharging, as has been the case in jurisdictions such as the UK and EU.
The RBA's review, as outlined in an issues paper, will examine the costs merchants face when accepting card payments and the regulatory framework allowing surcharges.
The RBA noted that lower payment costs could reduce merchants' likelihood to surcharge. The review aims to explore ways to lower payment costs through promoting competition, enhancing transparency and possibly amending surcharging rules.
The move has been endorsed by Prime Minister Anthony Albanese, who has said that easing the cost of living is the “number one priority” for his Labor government.
What happened in NSW?
The surcharging issue was identified by the NSW Auditor-General during the settlement of the Department of Customer Service (DCS) financial statements for 2023-24.
Graeme Head, the current secretary of DCS, sought clarification, leading to the discovery that the practice had been flagged as unlawful in legal advice from the Crown Solicitor's Office dating back to February 2016.
However, despite these warnings, the surcharges continued until the present government intervened.
Merchant fee surcharges are imposed to recover transaction fees charged by banks and other payment providers, and the NSW Treasury initially directed the recouping of these costs in 2012.
The advice from the Crown Solicitor's Office identified the practice as unlawful, yet the current administration says that it persisted across multiple government agencies, with surcharges ranging from 29 cents for a marriage certificate to $1.92 for vehicle registration renewal.
In response, the Minns Labor government has established an incident management taskforce, which has already disabled surcharges on more than 90 percent of online payments and more than 80 percent of Service NSW transactions.
Urgent efforts are also underway to eliminate all remaining fees across various services, including payments made at Service NSW Service Centres.
The government has encouraged affected individuals to register for updates on the response via the Service NSW website or hotline, and alternate payment methods that do not incur fees have been made available.
In addition, the secretary of DCS has referred the matter to the NSW Ombudsman and the Independent Commission Against Corruption (ICAC), calling for investigations into potential maladministration.
The centre-left Minns government is also pressing all departments to confirm by November 30 whether they impose merchant fees and whether they have the legal authority to do so.
“Our immediate efforts are focused on switching off the payment methods that charge these merchant fees as quickly as possible,” said Courtney Houssos, the NSW finance minister.
Houssos said that the government “will get to the bottom of what happened and why millions of people were unlawfully charged merchant fees”.
“Families, households and businesses expect governments to conduct themselves lawfully. That’s why all agencies have been instructed to examine their own processes.”
