News

January 2012

‘Excessive’ payment surcharges to be outlawed

Businesses will be banned from levying “excessively high” surcharges on all forms of payment before the end of this year, under government plans.

Firms will be able to add a small charge to cover their actual costs for using any particular form of payment but following Office of Fair Trading (OFT) recommendations, the government announced on 23 December that it plans to:

• ban excessive surcharges on all forms of payment
• extend the ban across most retail sectors
• consult on implementing the EU Consumer Rights Directive, with the goal of banning above-cost surcharges on any form of payment (e.g. surcharges that exceed the costs the business incurs on a card payment) before the end of 2012, rather than mid-2014 as would be required under the European rules.

The government will publish a consultation in the new year setting out its next steps.

Consumer Minister Edward Davey said:  "We want to make sure that consumers paying by card do not have to pay the excessively high surcharges being imposed on them by some airlines and other businesses. That is why we will consult on early implementation of the Consumer Rights Directive provision to protect consumers from excessively high credit and debit card charges."

The government move came after consumer rights group Which? made a super-complaint to the OFT in March 2011 about payment card surcharges in the passenger transport sector.

In its response, published in June 2011, the OFT found considerable evidence of companies using “drip pricing” practices for surcharges online – adding payment charges to the total price only after consumers have filled in a number of web pages during their purchase.

It concluded that surcharging for using a credit or debit card was potentially misleading to consumers when it came as a surprise and called for the government to ban surcharges on debit cards.

Link: Which? press release