Excessive charges for use of credit and debit cards to be banned

credit card

A new consultation will be launched on Monday to look at banning above cost payment surcharges; a measure the UK will put in place to bring part of the European Union’s Consumer Rights Directive into force. Traders will no longer be able to make a profit by charging the consumer for credit or debit card use above the amount it costs them to process that payment. This ensures that consumers are aware of the level of costs they are committing to and that traders who treat consumers fairly are not disadvantaged by those who use less transparent practices to lure consumers towards less competitive offers.

Norman Lamb said, “We want consumers to be able to pay for their goods and services without being hit by excessive hidden charges. That is why we are consulting on limiting the fees that traders can charge to consumers for using particular methods of payment. It can often be frustrating when purchasing a product or a service online, to find out only towards the end of the transaction that the final price is much higher due to things like payment surcharges. These proposals will stop companies from adding on these excessive charges, and allow consumers to see a clearer and more transparent breakdown of what they are paying for.

“These proposals are a welcome and important step for consumer empowerment, not just in the UK but across the EU. They form part of a wider strategy to simplify, strengthen and modernise consumer and competition frameworks. This Government is committed to delivering growth, and increasing consumer confidence will help markets work at their best.”

Consumers who fully understand the final price they will pay for a product benefit from being able to make fairer comparisons and more cost-efficient purchases. They are more empowered to make better purchasing decisions, which leads to a more competitive market where businesses truly compete on the value of a product rather than artificial prices which consumers will in reality find hard to obtain.

In December 2011, the Government announced plans to stop businesses from charging consumers excessive payment surcharges. This came in response to recommendations from the Office of Fair Trading (OFT), after the consumer body Which? highlighted the scale of the problem. The work will complement enforcement and compliance work by the OFT to ensure that add-on charges generally are transparent and consumers are able to compare prices more effectively.

The consultation will seek views on the timing of the implementation and how best to apply the proposals. Consultation responses will help the Government to make sure the provisions are useful and achieve their objectives, and inform the content of guidance for businesses to assist them in complying with the new provisions.