Preauthorisation of charges by accommodation providers

The Australian Competition and Consumer Commission (ACCC) is the independent statutory authority responsible for enforcing the Competition and Consumer Act 2010 (the CCA). The purpose of the CCA is to “enhance the welfare of all Australians through the promotion of competition and fair trading provisions for consumer protection.”

The ACCC has recently assessed concerns regarding whether the use of preauthorisation charges by accommodation providers in Australia may give rise to potential issues or contraventions under Australian Consumer Law (ACL).

Although an industry-wide approach to the use of pre-authorisation charges is unlikely to result in a breach of ACL, ACCC appreciates that this practice may lead to consumer detriment, in some circumstances. These include:

  • Where there is a lack of transparency over the purpose and justification for the use of preauthorisation charges;
  • Where there are unreasonable delays in the release of funds, and
  • Where preauthorisation charges do not appear to be proportionate to what is reasonably required to protect the provider’s legitimate interests.

To avoid any risks that the use of preauthorisations may raise issues or result in the potential for consumer detriment, ACCC encourages hoteliers to consider the following:

  1. Be transparent and upfront about the purpose and justification for the preauthorisation

Accommodation providers should ensure that guests are aware that a preauthorisation will be required, and the justification for its application. This should occur at the time the booking is made, and on check-in prior to any preauthorisation being applied to a guest’s card.

  • Cancel or complete preauthorisations as soon as possible

The ACCC understands that this is a requirement under Mastercard and Visa preauthorisation standards, and it is important that all staff are aware of this requirement. ACCC is aware it can take up to five days for financial institutions to release funds, however it is important the merchant cancels the preauthorisation as soon as possible, to avoid further delays.

  • Ensure that the preauthorisation amount is proportionate to the legitimate interests being protected

The ACCC understands that accommodation providers require a preauthorisation to cover any incidental charges incurred, and to act as a deposit for any unreasonable breakages or damage that may occur during a guest’s stay. Incidental charges may include mini bar consumption, dry cleaning, phone calls and other in-house services provided by the property. ACCC appreciate that the preauthorisation amount will vary between properties, and that this amount should be proportionate to the specific risks foreseen.

  • Consider what alternatives may be available  

The ACCC acknowledge that it is up to each individual property or chain to decide whether to accept cash deposits, in lieu of credit or debit card preauthorisation, however encourage hoteliers to be flexible and discuss other options with guests who may be concerned about this process.

It should be noted that ACCC do not plan to take any further action at this time, however they will continue to monitor complaints received about the use of preauthorisation charges by accommodation providers. ACCC will reconsider further action, if they receive further information that indicates a breach of these practices may have occurred.

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