Reserve Bank of Australia tightens up surcharging rules for taxi industry

The Reserve Bank of Australia tightened the wording of a set of taxi surcharging rules this week that are set to take effect next year.

Cabcharge, a payments system established in 1976 to allow consumers an alternative to paying with cash for taxi fares, normally imposes a 10 percent surcharge on the taxi fare, booking fee, tolls, and goods and services tax, bringing the total surcharge to at least 11 percent of the total fare, The Sydney Morning Herald reports.

An investigation into the taxi industry in Australia’s southeast state of Victoria led by Allan Fels, the former chairman of the Australian Competition and Consumer Commission, found that as much as 50 percent of the surcharge was paid to drivers in the form of rebates rather than being used to process card payments.

Beginning in March, the new rules will allow credit card issuers to require retailers to limit their surcharges to “reasonable costs.” If there is a conflict, card companies will be able to sue merchants and require them to provide evidence justifying their costs, according to The Sydney Morning Herald.

The average cost to retailers to accept card payments is 0.87 percent for MasterCard and Visa and 1.84 percent for American Express.

Airlines and the hotel industry, which frequently charge much higher than the average amount, have also come under fire for imposing excessive surcharges.

Though the RBA specifically targeted the taxi industry in the rules, Cabcharge said that it would be excluded from the changes, saying that the 10 percent charge is not a surcharge but a “service fee.”

“Our legal advice is that this does not apply to us,” a Cabcharge spokeswoman said, according to The Sydney Morning Herald. “As an aside, given the competitive nature of the taxi industry, if 5 percent could have been achieved it would have been done by now.”

MasterCard and consumer group Choice, however, dispute Cabcharge’s statement. Andrew Cartwright, the manager of MasterCard Australia, said that the new rules “clearly” apply to Cabcharge, adding that MasterCard would be advocating for the lowering of surcharges across a number 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,” Cartwright said, The Sydney Morning Herald reports.

Matt Levey, the head of Choice campaigns, characterized Cabcharge’s claim that it would not be affected by the new surcharging rules as “absurd.”

“It should be the first cab off the rank when it comes to the new surcharge rules hitting home,” Levey said, according to The Sydney Morning Herald.

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