Excessive card surcharges will be banned, says Treasury

 
Debit card The Office of Fair Trading called earlier this year for the law to be changed

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"Excessive" fees for using a debit or credit card to buy items such as travel or cinema tickets will be banned by the end of 2012, under government plans.

The move comes amid complaints that airlines, booking agencies and even councils were imposing excessive charges for using a card.

However, firms will be allowed to levy a "small charge" to cover payment processing costs.

The regulator has been investigating some airlines over surcharge clarity.

Complaint

Consumers buying a ticket online are often charged extra when they tick a box that says they intend to pay using a credit or debit card.

Sometimes, consumers have found the payment is only added after they have ploughed their way through up to eight pages of a website.

Examples of these charges are a £6 per person, per leg "administration fee" charged on all but one card by Ryanair, an £8 per booking charge by Easyjet - plus 2.5% when using a credit card, a £4.50 per booking credit card fee from British Airways, and a charge of up to 17 euros (£14.16) per person by Air Berlin.

Typical booking fees

  • Easyjet: £8 per booking on debit card; £8 plus 2.5% or £4.95, whichever is greater, on credit cards.
  • Air Berlin: 10 euros per person on debit card; 17 euros per person on credit card
  • Trainline.com: £3.50 per booking on credit card
  • DVLA: £2.50 for tax disc purchases on credit card

Local authorities and the DVLA also levy charges, as do many train, ferry, theatre and cinema ticket merchants.

Sunil Pandit told the BBC that he was charged £72 for using his debit card to buy airline tickets for his family.

"You come to the end of [the online process] and think there cannot be anything else, surely, particularly if you are paying by debit card. I was shocked," he said.

The issue of high surcharges prompted the consumers' association Which? to call on the regulator to investigate, saying "the price you see should be the price you pay".

However, it accepted there could be an additional cost added for the cost to the retailer of accepting a card.

The regulator, the Office of Fair Trading (OFT), published a report in June about the travel industry's use of surcharges.

It said charges must be clearer and surcharges for using a debit card should be banned.

Now, the government is planning to go further than the OFT's recommendations and change the law so all "excessive" surcharges are banned.

'Ripped off'

In effect, the government is bringing forward the implementation of new European rules, which were pencilled in for mid-2014.

These rules said that only the actual cost of processing card payments could be charged to consumers.

Aircraft Some airlines have faced criticism from consumer groups for their policies

Financial Secretary to the Treasury Mark Hoban told BBC Radio 4's Today programme: "It's important that consumers know up front what charges they pay.

"What we have announced today will give consumers the transparency they need.

"I think consumers do feel ripped off and we want them to be able to shop around."

Richard Lloyd, executive director of Which?, said that debit card transactions cost the trader about 20p, and credit cards cost about 1% or 2% of the total price.

"Given that airline passengers alone pay more than £265,000 a day in card surcharges, businesses should not drag their feet over this," he said.

"While the law will come into force at the end of 2012, we want companies to be upfront and fair over card charges today."

He hoped that the Irish government would work at the same pace as the UK government in implementing the changes, to cover traders and travel companies based in the Irish Republic.

The process of accepting credit or debit cards as payment is quite complex, although retailers point out that they absorb this cost in their sale price.

The OFT calculated that travellers spent £300m on card surcharges in the airline industry alone in 2010. Ryanair responded to the government's announcement by saying that it charged an administration fee - which also covered the cost of running the website - rather than a surcharge.

The OFT has been investigating some unnamed airlines over the "transparency and presentation" of their surcharges.

The government will launch a consultation at the start of 2012.

 

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  • rate this
    +3

    Comment number 59.

    Excessive charges are not the only thing to be concerned about. The near monopoly of VISA on credit card transactions is equally if not more scary. Who wouldn't like to have a 1.5-2 % cut of all transactions? The more so since the marginal cost to VISA is no more than a fraction of a penny per transaction. Their near monopoly extends world wide.

  • rate this
    +2

    Comment number 58.

    flying for 2p or £22 is not the issue, the final price you paid is but this is masked by these added 'charges' at the end which hides the true cost. eg if you go to a cafe and order a £8 breakfast as listed on the menu but when you come to pay for it, they say that will now be £30 as you are not paying in french francs (you cannot get an electron card from most banks it seems)+£3 for the fork.

  • rate this
    0

    Comment number 57.

    Come on you lot: Anymore ideas of how Ryanair can fill the gap with more creative fees? So far we have had:
    1,charging for the air we breath (difficult to measure and apportion)
    2, Admin fees (do that already)
    3, Using the loo (thinking about this one)
    4, Cabin crew moonlighting as aircrew (considered)
    5, sell expensive insurance (do that)
    6, ......? anybody?

  • rate this
    +42

    Comment number 56.

    People who use Ryanair deserve to be overcharged. It is nature's way of telling then that they are stupid.

  • rate this
    0

    Comment number 55.

    Whilst I agree with the sentiments this is not the real issue here. The issue is the excessive fees that banking institutes apply to the retailers and the smoke and mirrors approach they utilise to extract excessive fees. The best way forward is for the consumer to make the transaction and then be charged accordingly and directly by the card companies - that way they can see the card charges.

  • rate this
    +9

    Comment number 54.

    Businesses should profit from their product or service, not from "excessive" charges. That is not to say that surcharges should stop completely.

    Small businesses with low turnover need to be able to cover the set up and running costs of operating payment card options including PCI Compliance. These small business should be able to continue to charge an "appropriate" but not "excessive" fee.

  • rate this
    0

    Comment number 53.

    Should be stopped immediately.

    Surely these companies are in breach of advertising standards as well as basic fraudulent dealing.

    Of course, this is weakling government clap-trap who will always favour business over fairness for the people.

  • rate this
    0

    Comment number 52.

    All this means is that its now it's going to cost a £1 to go to the loo on a plane

  • rate this
    +6

    Comment number 51.

    I hope this applies to concert and sports event tickets too from vendors such as Ticketmaster. For too long have they got away with charging £4 or £5 as processing fees for electronic payments.

  • rate this
    +14

    Comment number 50.

    About time! A charge of ~£8 by Ryanair to use your credit card is beyond a joke...

  • rate this
    -6

    Comment number 49.

    Totally irrelevant.

    All that will happen is these companies will dream up another charge for something else instead - surely even the blinkered Treasury have worked that out, they can't be that naive, can they ?

  • rate this
    +3

    Comment number 48.

    @43 I was using my 2p flight as an example of why I did fly with Ryanair, because they are extremely cheap. I will use them for offers such as those (when rarely available). I acknowledge that getting to page 8 is annoying and I don't dispute the fact that this should be cleared up in order to assist the consumer and everyday life!

  • rate this
    +30

    Comment number 47.

    "Ryanair charged an administration fee - which also covered the cost of running the website - rather than a surcharge" So let me get this right, ryanair set up a website in order to enhance their business, as do many other companies around the world, and then he takes the p**s by charging us so that he can run that website. It's your business plonker, you pay for it.

  • Comment number 46.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    -24

    Comment number 45.

    FOLKS - Take Responsibility!!
    If you don't want to pay these 'excessive' charges - shop elsewhere - Simple!
    O'Leary and Ryanair and the DVLA etc. have not yet developed a mechanism to hold a gun to your head while you are on the internet.
    Sometimes you DO have to pay for convenience.
    And don't delude yourself, this will NOT reduce overall costs.
    Government - focus on real issues, don't pander

  • rate this
    +21

    Comment number 44.

    The theatre I work for is fairly unique in its sector in that it has never charged a card processing fee and has always built the cost into the advertised price of tickets. Recently, with funding worries, they've introduced an optional opt-out £1 donation for telephone transactions; but it IS entirely optional and the funds accrued go direct to the Education department. Seems reasonable.

  • rate this
    +16

    Comment number 43.

    @37 Ryan air usually charges a surchare for eac leg of the journey, for each passenger, even if one payment is made witht he credit card. Because you got to fly for 2p does not mean anyone else got to. thath's illogical. As to the rest of your comment, it's the fact that it takes until page 8 of the web site to establish the actual cost of the flight that's the problem.

  • rate this
    +51

    Comment number 42.

    I guess like many people i'll only believe it when I see it. Too many times in the past we've heard governments propose new customer protection only for it to be completely gutted by industry lobbying.

    It's about time we challenged the entire practice of 'add-ons' and hidden charges. Concert tickets must be top of the list with transaction/booking fees regularly being 25% of the ticket price.

  • rate this
    0

    Comment number 41.

    Yes, and of course the customer will now pay because of this new law.

    Don't think so.

  • rate this
    +6

    Comment number 40.

    The trouble is and we have sleep walked into this that the banks have engineered our society so that you must have a bank account ( Who gets paid in cash) and made it almost impossible to live a wholesome life unless you have a debit/credit card.

 

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