Shaun McKenzie was chatting with mates, unhappy at having to pay 2.1 percent on top of his Lower Hutt rates bill for the convenience of paying by credit card. When he found out a friend was paying less across the hill in Porirua, he decided to demand answers.

It turned out Westpac had been charging an incorrect fee since February 2016, but it was only when McKenzie asked questions that the mistake was spotted. For six years, every Hutt City resident who paid their rates by credit card had been overcharged small sums of, at most, $1.36. 

And now, a Newsroom survey has identified at least 17 councils charging above the odds – 2 percent or more on card transactions. 

Have you been charged an excessive surcharge? Email Newsroom Pro

Matamata-Piako’s surcharge is the highest disclosed, at 3.205 percent – though some councils don’t disclose their surcharges online and haven’t replied to questions.

The Commerce Commission says: “We would find any rate higher than 3 percent to be difficult to justify.”

Nick Russ, general manager of market regulations, says the commission has now written to several local authorities and other large merchants with “seemingly sub-optimal” surcharging practices.

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Jenni Cochrane is in charge of digital services at Matamata-Piako District Council. The council uses Flo2Cash as its payment gateway, she says, because it was the only third party payment gateway that integrated with the council’s back-end system when their online services were established.

Ratepayers made 205 payments through Flo2Cash in the past year, she says; the entire 3.205 percent surcharge goes to the payments company and none goes to the council.

“We are concerned to note that their transaction fee is markedly higher than other providers and will look into this further,” she says.

“Council is currently in the process of shifting our online services to a different platform, with a different payment gateway. We expect the online transaction fee to be about half the current fee. We will follow this up with both our current and new service providers when the Commerce Commission report is released.”

Matamata-Piako offers residents and customers several other free payment options, including direct debit, internet banking, or paying at council offices with cash or  Eftpos, which incurs no transaction fee.

Australia-based Flo2Cash has not replied to emails, and its listed number in Auckland is disconnected. Matamata-Piako council said the only way they had to contact the payments firm was through its support desk email address – the council had no names or numbers from which they could seek explanations.

The company’s website claims its services are also used by Westpac, Kiwibank, Unicef NZ, Kidscan, Oxfam, Amnesty NZ, the Salvation Army, SPCA, the Heart Research Institute, WWF NZ, NZEI and Unitec, an Auckland-based arm of of Te Pūkenga national polytechnic.

Gore District Council, which has been under scrutiny because of the row between new mayor Ben Bell and chief executive Stephen Parry, discloses the second-highest credit card surcharges: 2.88 percent.

The council’s corporate support general manager Lornae Straith says credit card transactions are only available to online customers, to cover bank charges and fees incurred in providing the online service.

In the past 12 months the council processed 682 credit card transactions, she says. It received $3,982 in merchant fees from customer transactions – and paid $5,818.37 merchant fee expenses to Westpac, Datacom and Paymark. “So, effectively, none of the money goes to the Council, it all goes to the supplier.”

Gore council offers other payment options that do not incur a surcharge: Poli pay, internet banking and real time debit.

Hurunui District Council charges 2.5 percent on credit card transactions and – in an apparent breach of the rules – also charges 2 percent on Eftpos transactions.

Nick Russ says the commission would not expect to see surcharges for cash or in-person Eftpos payments. “We are aware of a few instances where merchants have passed on surcharges for Eftpos – we continue to monitor whether this a more widespread issue.”

Jason Beck, Hurunui’s chief financial officer, says the Eftpos surcharge was set to match the external cost that Council was required to meet, when it was initially loaded into the system.

Like the 2.5 percent credit card surcharge, he says the Eftpos charge would be reviewed to ensure that the Council recovers any external cost involved with providing that service.

“The Council’s stance is ensuring that any external cost for this service is met by the customer rather than absorbing these costs, which in turn will result in an additional cost that the district’s ratepayers have to bear,” he acknowledges.

Other councils charging high credit card surcharges include Waimate (2.5 percent), Marlborough (2.3%), Mackenzie and Waimakariri (2.2%), and Thames-Coromandel and Kaipara (2.1%). Tasman, Waitaki, Dunedin, Clutha, Tararua, Waipa, Bay of Plenty Regional Council and Hawke’s Bay Regional Council all charge 2.0 percent surcharges.

Back at Hutt City Council, they investigated after Shaun McKenzie’a complaint. 19,000 small overcharges by payments provider Westpac added up to $23,000 – a not insignificant sum.

“Because the amounts were small and refunding cannot be automated, we agreed with Westpac that they would donate the overpaid amount of $23,000 to the Kai Collective in Lower Hutt,” says the council’s chief financial officer, Jenny Livschitz. “We also invited people to seek a refund if they wanted.”

From the start of the new financial year, on Saturday, Hutt City Council is abolishing its credit card surcharge for rates payments.

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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