Wellington woman shocked at 26 percent card surcharge after using taxi

Story by Ellen O'Dwyer of RNZ

A Wellington resident says she was shocked when she saw a 26 percent card fee on a trip to the airport.

The Commerce Commission said the company's surcharge, relating to Eftpos machine costs, was "not justifiable" and it was disappointed it was still applying that fee, despite assurances it would not.

Wellington Combined Taxis has a $3.80 flat card payment fee, made up of a $2.30 card transaction fee and a $1.50 machine technology fee. 

Wellington resident Nicola Parsons said she noticed the fee when she took a trip to the airport with her son last month, and got a 26 percent card surcharge on the trip.

Her fare, which was discounted due to a Total Mobility Card for her autistic son, was $14.65, including a card fee of $3.80. 

At the full cost of the fare - which would have been about $58.00 - the fee is 6.5 percent. 

Parsons said at the time she requested to pay by Eftpos to avoid any extra fees - but was told there was a flat fee for all transactions. 

She said she then paid by credit card, and was shocked when she saw the receipt and the $3.80 electronic service fee or "ESF" card charge. 

"I said 'Oh I would have paid cash if I'd known it would be that big a charge' and he got really quite agitated and said 'well it's not something I charge it's the company charge, it's for the unit' - he asked if I'd ever taken a taxi before."

Parsons said the labelling for the charge was not clear in the taxi, and that the driver had to search around for an explanation of the ESF charge - which he eventually found on a sticker on the cab's roof. 

She questioned why the fee was so high when more and more people were using cards in day-to-day life. 

"We have cafes in our neighbourhood that are totally cashless, you would think it would become cheaper to use cards the more and more they are used."

'People are struggling' - Consumer NZ

The Commerce Commission has said there should be no surcharges for customers who use card payments with Eftpos, or debit cards which were inserted or swiped in a machine.

It also did not think the costs to run a payment device should be passed on to consumers, because it considered this the cost of doing business. 

Businesses receive fees for accepting paywave and credit card payments, so they are allowed to pass surcharges for these payments - but they should only charge the cost incurred for accepting that type of card.

Consumer NZ said it was seeing concerning examples of high card surcharges, despite the introduction of the Retail Payment Systems Act in November 2022, which was intended to curb paywave and credit card charges.

Campaigns manager Jessica Walker said people were being hit with exorbitant charges across the country - including from taxi companies, accommodation suppliers, and parking apps. 

"People are struggling and so it's really important that they are not paying more than they need to, because, let's face it, we are using cards day in, day out, and all of these little charges add up," she said. 

Consumer NZ believed debit paywave surcharges should be no more than 1 percent of a transaction, and domestic credit card charges should not go above 2.5 percent. 

Taxi company responds

Wellington Combined Taxis chairman Dave Clymba said the company was in discussions with the Commerce Commission and its electronic payment provider about potential changes to its charges. 

Clymba disagreed that the charges were not clearly labelled, saying they were transparently laid out in the fare schedule on the taxis.  

He said there was always an option for customers not to use cards.

"If somebody wishes to avoid the fare schedule costs, they have the option to pay cash, which takes away the need to use credit cards or Eftpos, which gets rid of some of these costs people seem to be concerned about."

Commerce Commission market regulation acting general manager Simon Thomson said Eftpos fees should not happen, and that they thought the company had agreed to remove this charge last year.

"We are disappointed to hear of this incident, given we had understood the Board of Wellington Combined Taxis had agreed to remove transaction fees from Eftpos transactions last year, as we do not think a surcharge on an Eftpos transaction is justifiable."

How do paywave and credit card surcharges work?

According to the commission, businesses are allowed to pass on some charges relating to paywave debit or credit card transactions. 

This is because businesses get a merchant service fee when customers pay by contactless and credit card.

A merchant service fee is made up of several charges, including an interchange fee from the customer's bank, a scheme fee from companies such as Visa and Mastercard, a switch fee from the payment machine provider, and a fee from the retailer's own bank. 

The commission says the largest portion of the fee is the interchange fee - which the Retail Payment Systems Act 2022 caps at 0.2 percent for contactless payments, to 0.8 percent for local credit cards.

Foreign cards pass on even higher costs. 

Business owner says no control over surcharge

Dominic Kelly, who owns Wellington bar Hashigo Zake, does not think the card fees for his business have reduced - in fact he says he has seen an increase. 

In June 2023, his transaction fees were 1.2 percent and these reached 1.6 percent in December.

The amount a business is charged can depend on the proportion of credit card users it has in a month, versus the amount of paywave users - it can also depend on the amount of transactions it has overall. 

But like most retailers, he only has one pay terminal - so must average out the surcharge for debit and credit card users. He's put that as a 1 percent surcharge on paywave transactions. 

He said he did not think think it was fair debit card users were paying more than the credit card users.

"For us, and I think for most retailers, we don't have an Eftpos terminal that can vary the surcharge. 

"So we would like to have a different surcharge for debit cards or credit cards, but we can't."

Thomson said the commerce commission received about 215 complaints about excessive surcharges since November 2022.

He advised businesses to get in touch with their payment providers if they were unhappy with the amount of the fees they were getting hit with.  

"We are currently engaging with businesses about the surcharging that's going on. And ultimately if we think there is behaviour that is not fair, that is not transparent or misleading, then we can certainly look into that either through the Fair Trading Act about whether there is misrepresentation of the fees they are charging."

Caps on interchange fees had resulted in about $105 million of savings for merchants and about $15m in savings for consumers, he said.