UK bans 'excessive' card surcharges

The UK government has banned firms from imposing "excessive" surcharges when customers use their debit and credit cards to pay for things such as flights and cinema tickets.

6 comments

UK bans 'excessive' card surcharges

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

The new rule, which comes into effect immediately, is designed to stop companies from charging more than it costs them to process card payments, says the Department for Business, Innovation and Skills.

The practice of adding charges of up to two per cent on card purchases has been common practice in industries such as the airline sector, rail, event tickets, cinemas, car dealerships and hotels.

According to the Office of Fair Trading, Brits spent around £300 million on payment surcharges in 2010 in the airline sector alone and the vast majority of people - around 90% - object to these fees.

Consumer Minister Jo Swinson says: "The practice of excessive payment surcharges has been ripping off consumers for far too long...I am delighted that the ban will stop retailers from cashing in by charging add-on fees that simply do not reflect the real cost of processing the payment."

Richard Lloyd, executive director, Which?, adds: "Over 50,000 people supported our campaign to end rip off surcharges so we're pleased the government is implementing this ban. For it to be effective there must be a tough enforcement regime and companies must play fair and not pass costs on to customers in other ways."

Read the BIS guidance on the regulations here

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Comments: (6)

A Finextra member 

A link to the rule or legislation would be most helpful.

Matt White North America editor at Finextra

Have added the link above, Eduard.

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

Brilliant move. Kudos to the UK government. It's true that merchants incur MSC / MDF to accept card payments. At the same time, many of them receive freebies (e.g. free fire insurance coverage for their premises) when they sign up for a merchant account. Therefore, their net cost of accepting cards is even lower than the MSC / MDF rack rate. Therefore, they have no justification in levying surcharges higher than this net cost and I hope the government bans them from doing so as the next step.

A Finextra member 

 

It is interesting the UK government regulators jump all over merchants surcharging yet has sat on their hands for over a decade with regards to looking at the "currency conversion fees" a few very large UK Issuers have coordinated at 3% or more and charge their customers' for international purchases on credit and debit card purchases.

 

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

@FinextraM: Interesting point. Maybe it's because (a) it affects fewer than 5% of cardholders in UK, (b) it's already under the purview of SEPA and, most importantly, (c) the 3% charged by issuer banks is much lower than the commission levied for GBP:EUR currency changes by exchange houses in airports, railway stations and hotels all over Europe. 

A Finextra member 

The loading applied by UK banks should be compared with the charges that the German banks charge their cardholders for exactly the same service - payment in a foreign currency:

Lufthansana World (basically a consumer card) 1,75%

Lufthansa World Business                               1,25%

Barclaycard                                                  1,99%

GermanWings Gold (Barclays)                         0%

Most German banks charge between 1 and 2%, UK banks issuing in Germany have tended to be at the expensive end.

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