Following the Office of Fair Trading’s recommendations, the Government will:
- Ban excessive surcharges on all forms of payment, not just debit cards;
- Extend the ban across most retail sectors, not just transport; and
- Become the first European country to act by implementing forthcoming European legislation early to ban this practice before the end of 2012.
Businesses will not be able to load on excessive payment surcharges. But they will be able to add a small charge to cover their actual costs for using any particular form of payment
The Financial Secretary to the Treasury, Mark Hoban, said:
"We want consumers to be able to shop around. They have a right to understand the charges they may incur up front and not be hit through a hidden last minute payment surcharge.
"We’re leading the way in Europe by stopping this practice. The Government remains committed to helping consumers get a good deal in these difficult times.”
The 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."
To take this forward, the Government will publish a consultation in the New Year setting out next steps.
Which? executive director, Richard Lloyd, says:
“The Government’s decision to ban ‘rip-off’ debit and credit card surcharges is a huge victory for consumers. This announcement goes further than the Office of Fair Trading’s proposals, finally putting an end to these unfair and excessive charges.
"Over 50,000 people supported Which?’s campaign to see these fees stamped out.
“Given that airline passengers alone pay more than £265,000 a day in card surcharges, businesses shouldn’t drag their feet over this. While the law will come into force at the end of 2012, we want companies to be upfront and fair over card charges today.”
Melanie Johnson, Chair of The UK Cards Association, says:
"This is a terrific Christmas gift for consumers.
"The UK Cards Association fully supported Which? and the OFT on this issue and we’re delighted that the Treasury has decided to bring into line those few businesses who continue excessively charging us all for using our cards.
"The charges in no way reflect the true costs of processing the transaction, are rarely up front and could not be justified".
Kevin Mountford, head of banking at MoneySupermarket.com comments:
"On the face of it, this is great news for consumers and it is great to see the Government taking action to protect the average man on the street.
"To date, a number of transactions, particularly on-line, have attracted extortionate fees that are inappropriately classed as booking or card related charges.
"Whilst most people will accept that there is a need to pass on legitimate charges, it is clear that some airlines or ticket booking agencies are profiteering from this.
"MoneySupermarket.com ran a report in the summer looking at the travel market, to coincide with the peak travel season and found that one particular airline was charging £6 per passenger for both outbound and return journeys despite the fact that this was a single transaction.
"Given that in reality, card transaction fees range between two per cent and six per cent, this would have resulted in costing twice what it needed to be.
"This decision by the Government will impact the retailers' profit margins, however this will provide greater transparency and stop certain companies hiding behind artificial card transaction costs.
"The card industry has been the subject of a wave of regulatory changes over recent years.
"With this week's other announcement from the OFT that overseas currency exchange and ATM charges will be more transparent, it has obviously been a positive few days for consumers and this in turn will give consumers a better chance to shop around for real value."
James Hickman, MD of foreign exchange firm Caxton FX, said:
“The consumer has won another battle this morning following the news that excessive fees for using a debit or credit card to buy items will be banned.
“For a long time now, customers have been getting a raw deal when they purchase airline tickets online, as well using cards overseas, and the charges banks are levying don’t truly reflect the real cost of the transaction.
“We welcome the Government’s decision to bring forward the implementation of new European rules, another smart move following news that the banks are going to scrap charges for using debit cards to purchase foreign currency in the UK.
“Consumers should always shop around for the best deal and ensure they know exactly what they are paying for whether it is online or at the checkout.
“Prepaid currency cards are a great way to save money on your holiday expenses, especially as budgets are being squeezed as we head into 2012.”
