Online property management platforms are charging renters new fees or pushing them onto paid “memberships” to avoid processing costs associated with card payments in the wake of the ban on surcharges. Tenants have been encouraged to challenge or bypass additional fees charged by so-called rent-tech platforms, including in Victoria, where fees on rent payments are banned.
At least 1.2m rent payments each month are made on the platforms in Australia, typically at the instruction of property managers and often with an extra transaction fee.
Platforms adjust after Reserve Bank ban
Following the Reserve Bank’s ban on surcharging from 1 October, the rent-tech platform OurProperty told Guardian Australia it had stopped accepting direct card payments across the country. Its founder, Russell Burstow, said it previously charged a 1.95% surcharge. It would now route payments through Pay4it, a platform Burstow founded in August which charged its own 1.95% “service fees”.
Burstow said OurProperty passed the cost on to tenants as the alternatives were to lift costs of real estate agencies or stop accepting cards, which he said would put customers who relied on credit cards into rental arrears. “There’s no way that the agency would absorb that sort of money,” Burstow said. “They would just pass it on to the landlord, who would just push the rent up.”
Burstow said OurProperty and Pay4it were not making more money out of the new arrangements and would start losing money unless the Visa and Mastercard networks dropped their processing fees.
Victoria’s ban and new membership model
Victoria will outright ban rental providers and real estate agents from charging people fees to pay their rent or submit tenancy applications later this month, after prohibiting rent-tech companies from doing so in March. In that state, OurProperty will introduce a new system of “memberships” on Tuesday. It will waive the “service fees” associated with paying by card via Pay4it for tenants who take out a “platinum” membership, which costs 1.95% of their monthly rent.
Curtis Thomson, chief executive of OurProperty, said the Victorian memberships included new app features and did not replace old card surcharges. He said Victorian tenants would by default be granted a “silver” membership, meaning their real estate agency would have to cover the fees it charged for direct debit and automated bank transfer. Direct debit and automated transfer will still incur fees on OurProperty outside Victoria.
A Melbourne tenant using the platform, Hazel Kearns-Rees, said she was first notified on Thursday that she would have to opt out of her new membership. “The framing of the costs as memberships … and the fact that all free options are made to be deliberately very difficult and inconvenient feels pretty unethical,” Kearns-Rees said. “The ways that they are making it specifically difficult to make a fee-free rent payment is really disgusting, especially in a cost-of-living crisis.”
Other platforms and consumer advice
The loss of card surcharging has upended rental payments as businesses find alternatives or workarounds to avoid footing the transaction cost themselves. Another platform, Ailo, has also swapped card surcharges for paid memberships. Ben White, the company’s founder, said customers would be paying the same or less overall and fee-free options had not changed. The biggest platform, DEFT, has blocked debit and credit cards altogether. Its owner, Macquarie Bank, said card accounted for just 2% of the 1.2m rent payments it processed each month and tenants could still pay via BPAY, direct debit and PayID.
Dr Fengfei Li, a senior lecturer in finance at Deakin University, said the surcharge reforms were meant to change prices and renaming a charge to a “membership” fee was not necessarily permissible under the ban, even if bundled with other services. “The important questions are what the fee actually pays for, how it is calculated, and whether tenants are effectively required to pay it to access card payments,” Li said. “Consumers do not simply have to accept a new fee at face value. They can first ask the platform to explain the charge and, where the service is optional, decline it and use an available fee-free payment method.”
Every Australian state requires that tenants be offered at least one fee-free way to pay rent and some have banned all fees on payments. In New South Wales, the office of the fair trading minister, Anoulack Chanthivong, urged worried renters to seek the regulator’s help. “We encourage anyone who is concerned they have been misled into paying memberships or other fees while paying their rent to get in contact with NSW Fair Trading,” a spokesperson said.
A Victorian customer – who lives in a build-to-rent property in Melbourne’s Parkville run by the property management company UKO – successfully challenged a new payment fee they were recently charged. UKO wrote to tenants in August to “strongly encourage” them to sign up to a new payment portal operated by the property management software company Yardi, and that they should set up recurring rent payments.
Tenants claim they were not told they would be charged a 1.99% “service fee”. The Guardian sought comment from UKO. One tenant raised the fee with the state government regulator after noticing they had been charged an additional $54.47 on top of their monthly payment. They were charged the fee despite Victoria’s new protections around third-party rent-payment fees. When they queried the fee with Consumer Affairs Victoria and their building manager, they were told it had been a card payment processing fee and that it would be removed from 30 September.
“I don’t know whether the surcharge would have been removed … if I hadn’t raised it,” they said. The tenant said they were concerned other renters may be unaware they were paying similar fees. Contacted for comment, a Consumer Affairs Victoria spokesperson said the regulator “takes reports of misconduct seriously and will investigate and take action where necessary”.
