Industry

An end to credit card charges?

Most of us have read something in the press recently about the crackdown by the RBA stopping retailers from passing on to consumers inflated credit card charges.

The new rules started September 1, 2016. Not surprisingly, I have fielded many queries from resident managers telling me that their owners are demanding that they reduce, or simply not charge, the credit card charges that they are currently charging under their letting appointments. Based on the current laws, resident managers are not subject to the RBA restrictions for two reasons. Firstly, the restriction only applies to “large retailers”, which are defined as either having gross revenue of more than $25 million, the value of their assets is more than $12.5 million, or they employ more than 50 people. Secondly, a resident manager is not a retailer but is rather an agent of the owner providing letting and other services to the owner.

So while the rules will extend to all retailers from September 1, 2017; unless there is some change to the proposed rules, a resident manager will still not be subject to the restriction. However, the fact that resident managers may not be caught by the new rules is not the end of the matter. There is little doubt that owners will expect a manager to adopt a similar position to retailers and limit the credit card charges to those imposed by the bank or card provider. Refusing to do so is likely to cause angst and distrust. So what should a manager do?

Many clients have expressed to me the view that it is impractical to pass on to guests the credit card charges that banks and others impose and that to do so could lead to loss of business. A manager, though, should not be out-of-pocket in relation to such charges.

As readers of various articles I have published in recent months will be aware, I am an advocate of the concept of bundling. That is where a number of charges that might usually be dealt with as single line items in a letting appointment or owner statement are bundled together in one fee expressed as a percentage of the tariff or rent collected. In the case of credit card charges I am encouraging my clients to review their schedule of fees and charges altogether, work out which charges can be appropriately bundled into a single item (typically described as a management and services fee) and incorporate what they might previously have charged as a credit card fee in that bundled fee or charge.

There is no need to list in the description of the bundled fee or charge all of the individual items that it comprises and therefore no need to make reference to it, including a credit card fee. I would suggest that consideration to reducing slightly what the overall bundled fee percentage might be if the previous credit card fee is included in full, so that you can justifiably tell owners that there has been a reduction in the total percentage that would have applied if all of the previous fees and charges had been included in the new bundle.

We have gone through this process with a number of clients already and the feedback from them, and the feedback to them from their owners, has been very positive.

Managers who do not look to address the issue in coming months can expect their owners to raise the matter with an expectation that there will be some reduction in or removal of credit card charges. Dealing with the issue in a proactive way before that happens is the better course of action.

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