Costly mistakes, disputes and official sources
Merchant agreements, exit fees and unfair contract terms: what to check before you sign
How to read a merchant services and terminal rental agreement, how early termination fees are calculated, and how the unfair contract terms rules protect small businesses on standard-form contracts.
Before you sign a merchant agreement, check five things: the minimum term and whether it renews automatically; the early termination fee and how it is calculated; whether terminal rental is a separate agreement that survives closing the merchant facility; when and how the provider can change fees or terms; and when it can hold funds or close your account. Most merchant agreements are standard-form contracts, and if your business has fewer than 100 employees or annual turnover under $10 million, the unfair contract terms rules can make a one-sided term void. Since 9 November 2023 using or relying on unfair terms in such contracts can also attract penalties. These rules help, but they do not replace reading the contract.
This guide is part of the overview of payment processing mistakes. It is general information, not legal advice.
The documents that make up the deal
| Document | What it covers | Why it matters |
|---|---|---|
| Merchant services agreement and general terms | Processing, settlement, fees, chargebacks, holds, termination | Main contract; often incorporates the fee schedule and network rules |
| Fee schedule or letter of offer | Your rates and fees | Check every fee, not just the headline rate |
| Terminal rental or equipment agreement | Rental, term, damage, return | Sometimes with a different company and a separate term |
| Operating guide or merchant manual | Day-to-day rules, chargeback and PCI duties | Breaching it can be a breach of the agreement |
| Card network rules (incorporated by reference) | Network requirements | Can change; providers pass them on |
How early termination fees are calculated
Common structures (illustrative):
- Fixed fee: for example, $300 if you leave before the end of the term.
- Remaining rental: the rental for the rest of the term. Two terminals at $40 a month with 20 months remaining = 2 × $40 × 20 = $1,600.
- Sliding scale: for example, $500 in year one, $250 in year two, nothing after.
- Minimum fees shortfall: the difference between fees paid and a promised minimum.
Put the actual figure from your agreement into the switching payback calculator when deciding whether to leave. Leaving at the end of the term, after giving the notice the agreement requires, often avoids the fee altogether.
Clauses to read closely
- Term and renewal: does it roll over automatically, and how much notice do you need to give to stop it?
- Fee changes: can the provider change rates at any time, and with how much notice? Can you leave without an exit fee if it does?
- Pass-through of cost changes: on cost-plus plans, interchange and scheme fee changes should flow through; on flat plans, is there any promise about cost reductions such as those from 1 October 2026?
- Holds, reserves and set-off: when the provider can delay settlement or take money from your account.
- Termination by the provider: can it close your facility without notice or reason?
- Liability and indemnities: who bears losses from fraud, data compromise or network fines.
- Equipment: loss, damage, return deadlines and non-return fees.
Unfair contract terms and small business
The unfair contract terms rules are in the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010) and, for financial products and services, in parallel provisions of the ASIC Act 2001. Which regime applies to a particular merchant or equipment agreement can depend on what is supplied; the protections are similar. ASIC applies the ASIC Act rules (section 12BF makes an unfair term void) to standard-form small business contracts for financial products and services, where the upfront price must also not exceed $5 million, and it has taken action over a payment service provider's standard-form terms with small business account holders.
| Point | Rule |
|---|---|
| Which contracts | Standard-form contracts, generally prepared by one party with little or no chance for the other to negotiate |
| Small business | At least one party has fewer than 100 employees or annual turnover under $10 million (since 9 November 2023) |
| Unfair term | Causes a significant imbalance, is not reasonably necessary to protect the legitimate interests of the advantaged party, and would cause detriment if relied on |
| Effect | An unfair term is void; the rest of the contract can continue |
| Penalties | Since 9 November 2023, proposing, using or relying on unfair terms in these contracts can attract civil penalties |
| Not covered | Terms defining the main subject matter, the upfront price, and terms required by law |
Examples of terms that may be unfair include terms letting only one party vary the contract or end it, or penalising only one party for breach. Whether a term is unfair depends on the whole contract and the circumstances. Price increases and exit fees are not automatically unfair, especially when disclosed upfront.
Subscriptions from 1 July 2027
The Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 adds subscription rules to the Australian Consumer Law from 1 July 2027. They include requirements for information and a straightforward way to cancel, and they extend to small business subscribers on standard-form contracts. Whether they apply to a particular payment or POS subscription will depend on the final rules and regulations. Check ACCC and Treasury guidance closer to the date.
If you think a term is unfair
- Raise it with the provider in writing and ask for it to be removed or not relied on.
- Use the provider's complaints process; if it is a member of the Australian Financial Complaints Authority, small businesses may be able to take the dispute there.
- Contact your state small business commissioner or the Australian Small Business and Family Enterprise Ombudsman for help.
- Report concerns to the ACCC (or ASIC for financial services contracts).
- Get legal advice for significant amounts.
See official sources and complaints.
Frequently asked questions
Can I negotiate a merchant agreement?
Often the fees and term can be negotiated, especially with a competing quote, even if the general terms cannot. Get any changes in writing.
Is a large exit fee unfair?
Not automatically. An exit fee disclosed upfront that reflects the provider's costs may be fair. A term that lets the provider raise fees at will while charging you a large fee to leave may raise concerns. Get advice for your situation.
Does closing my merchant facility end my terminal rental?
Not always. If the rental is a separate agreement, it may continue. Check before you switch.
Sources
- Australian Competition and Consumer Commission — unfair contract terms in small business contracts
- Australian Securities and Investments Commission — unfair contract terms in financial services contracts
- Federal Register of Legislation — Competition and Consumer Act 2010, ASIC Act 2001 and the Unfair Trading Practices Act 2026
- Australian Small Business and Family Enterprise Ombudsman — small business dispute help
