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Ban on Payment Surcharges May be Implemented Early

Thursday, 10 January 2013

A ban on payment surcharges has been in the legislative pipeline for some time now and affected businesses must be prepared to change their practices. Regulators are keen to implement a ban on payment surcharges which they view as excessive fees levied by companies on consumers when they use credit or debit cards to buy goods. The explosive growth of online shopping has seen a European wide crackdown on practices that are viewed as harmful to the consumer.

What are Payment Surcharges?

Payment surcharges are charges added to the cost of a product or service when payment is made by credit or debit card to help cover the cost of administering the process. They are commonly found when consumers carry out transactions over the internet but many shops and other businesses also charge them for using card payments.

Although there may be an actual cost to businesses when they accept payment by card, often they charge a considerable excess to the true cost. Although excessive charges are most commonly found on travel websites, many other organisations have used them - even some local authorities and the DVLA.

The Consumer Rights Directive

The EU’s Consumer Rights Directive must be implemented by member states into law by December 2013. The Directive contains a raft of provisions designed to bolster the rights of consumers, including provisions to ban excessive surcharges.

Article 19 states that 'member states shall prohibit traders from charging consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of such means'.

This means that traders will still be allowed to include surcharges but only to cover the actual costs of using a card payment method and not more.

A Ban on Payment Surcharges May be Implemented Early

Although the ban is not due to come into force until December 2013 there has been considerable pressure to bring it forward. ‘Which?’, the consumer organisation launched a super-complaint in 2011 suggesting that the practice reduced the clarity of advertised prices, generating considerable consumer detriment. The Office of Fair Trading have previously taken action in this area to improve transparency and also support early implementation of the ban. The Government launched a consultation which closed on 15 October 2012 to look at implementing the ban early.

The considerable pressure for implementing an early ban on payment surcharges mean that businesses should act early to ensure that they are prepared for its arrival.

If you need assistance to ensure your payment policies and procedures are regulation compliant, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crichton via e-mail or by telephone on 0207 611 4848.