RBA aims to restrict taxi cards surcharge

THE detested 10 per cent surcharge whacked onto taxi fares for the privilege of paying by a card won't survive the new year if the Reserve Bank gets its way.

The bank this week tightened the wording of surcharging rules due to start next year, making explicit for the first time that they apply to ''the taxi industry''.

Cabcharge typically imposes a 10 per cent surcharge, subject to the GST, on the metered fare, flagfall, booking fee, any tolls and the GST, making the total impost at least 11 per cent of the fare.

This year's inquiry into Victoria's taxi industry, chaired by former Australian Competition and Consumer Commission chairman Allan Fels, found that as much as half of the surcharge was paid to drivers in rebates rather than used to process the payment. Its best guess was the cost of processing was about 5 per cent of the value of the transaction.

The rules, starting from March, will allow credit card issuers such as Visa, MasterCard and American Express to require retailers to limit surcharges to ''reasonable costs''.

Where there is a dispute, card companies will be able to take merchants to court and require them to provide evidence of their reasonable costs. The Fels report noted that Cabcharge refused to provide it with data on its costs.

The cost to business of accepting credit cards varies between industries but the average cost for retailers is 0.87 per cent for MasterCard and Visa and 1.84 per cent for American Express.

Airlines and hotels, which often charge more than this, have also been accused of imposing excessive surcharges on customers.

Despite the RBA explicitly identifying the taxi industry, Cabcharge said it had received legal advice it would be excluded from the changes. It maintains the 10 per cent charge is not a surcharge but a ''service fee''.

''Our legal advice is that this does not apply to us,'' a spokeswoman for the company said on Friday. ''As an aside, given the competitive nature of the taxi industry, if 5 per cent could have been achieved it would have been done by now.''

However, this claim was rejected by MasterCard and the consumer group Choice. Cabcharge shares had also fallen 5 per cent by Friday afternoon, after a similar slump on Thursday, suggesting investors think it will not escape the rules.

The country manager of MasterCard Australia, Andrew Cartwright, said the new rules ''clearly'' applied to Cabcharge and MasterCard would be pushing for surcharges to be lowered across a range of industries.

''Clearly there are examples of certain industries where it's the view of many that the consumer is being slugged with an excessive surcharge,'' he said.

While he was unable to say how much consumers should be charged for paying on credit when taking a taxi, he said it was certainly lower than the current surcharge.

The head of campaigns at Choice, Matt Levey, described Cabcharge's claim that it would be unaffected by the new rules as ''absurd.''

''It should be the first cab off the rank when it comes to the new surcharge rules hitting home,'' he said.

This story RBA aims to restrict taxi cards surcharge first appeared on The Sydney Morning Herald.