The death of the rip-off card surcharge

That’s interesting, Lauren. When something like this is announced the politicians will be falling over themselves to claim credit. The detail you’ve given shows this is far from the case. Thanks.

These aspects of the EU being useful rarely enjoyed much publicity in the UK. It is a shame that the BUEC site [consumer groups in Europe] is not linked directly to Which? and a commentary made on EU decisions which affect UK citizens also.

Improved payments law: down with surcharges, up with safety

PRESS STATEMENT – 08.10.2015

With today’s vote in the European Parliament, the final hurdle to an upgraded EU payment services law that aims to make payment transactions safer and terminate card surcharges has been cleared.

The way people make payments is changing fast – increasingly payments are made via other providers than one’s bank (so-called third party providers).

Consumers will benefit in the following ways:

Surcharges for the use of debit and credit cards (for example when booking a flight or hotel) will be banned;
The consumer’s personal liability in case of fraudulent payments (for example with a stolen card) will be reduced from €150 to a maximum of €50. This amount can be further decreased if for instance the consumer did not act negligently;
Consumers are entitled to a direct refund from their bank in the case of an unauthorised transaction when using third party providers (for example Sofort or Trustly);
Security breaches or data losses must be communicated immediately to the users of payment services.

Monique Goyens, Director General of The European Consumer Organisation (BEUC), commented:

“Card fraud for euro payments amounts to €1.4 billion1. With new payment players entering the market, it is paramount that security is continuously being strengthened which is why, the upgrade of the EU’s payments law is a positive development.

“Having your bank card or bank details stolen is a very stressful experience. And being forced to pay hefty personal liability fees is just adding insult to injury for the victim. This law will substantially bring down consumers’ personal liability.

“In addition, surcharges for card payments are finally becoming history. They are often excessive and unjustified, and banning them in Europe is a great achievement for consumers.”

1 European Central Bank, https://www.ecb.europa.eu/pub/pdf/other/4th_card_fraud_report.en.pdf

I welcome the end of these charges which can often be disproportionate and unfair. However, I am also concerned John that higher merchant charges will be passed on to customers who will then be worse off in the long run. A somewhat hollow victory.

I agree that this sounds like a rather hollow victory for consumers. A bit like “now you can borrow enough to get completely out of debt…”

If charges are passed on the customers from the outset regardless of how they ultimately pay, it is possible that if spread over all they could represent only an extra few pence/a quid/couple of quid per purchase. As charges currently seem to vary wildly from company to company and you only find out at the moment of paying, price comparison can be a real bother.

Thank you Lauren. I agree with you, and it also should eliminate the profit element inherent in the present situation and leave that money in customers’ hands. Whether, because they are treading on a false margin, any companies would go to the wall as a result remains to be seen, but I tend to take Sophie’s view that averaged out across all purchases it would be infinitessimal and most companies should be able to cover it through efficiency and productivity improvements.Nevertheless, there is a risk of price inflation and I glad that Which? is going to keep an eye on it.

I meant “trading”, not “treading”, in the third sentence.

I am a carpet retailer. A husband & wife partnership that makes little profit but we are working. (One camping holiday per year & a very basic lifestyle).
We take cards & only charge what we need to cover the merchant chges. Credit card sales @2% (& VAT paid out of that) does not fully cover the chg to us. No chg for cash, BACS or Debit cards. This is NOT ripping customers off in any way. Since charging for credit cards only, their use has dropped by 80%, saving us chges during the dire recession. Trade is still not the same as pre-recession.
I agree the ‘ripping off’ does occur & good strategic law should cover this. But in Jan ’18, the baby is being thrown out with the bath water & careful customers (debit, cash or bacs payers) WILL pay for those who use credit cards with abandon. Maybe the merchants companies should be stopped charging me for the debit & contactless transactions? See how that goes down?
Blanket law is as bad as no law. Why can’t the lawmakers/writers (who no doubt earn far more than i do) devise good, strategic, common sense law to cover this. Is this beyond the ‘wit of (well paid) man’? ?
We are not a Limited business & we cannot afford to sub customers’ credit habits. We personally do not use credit cards. But we do get stung by small shops that unfairly refuse debit cards on sales under £5 or£10. We cannot afford foreign holidays but I know people are also ripped on travel chges when using debit cards too. This is where the law should level the ground, not throw a ‘grenade’ at it!

Some of use use credit cards not “with abandon” but because of Section 75. Please see MoneySavingExpert.com or our very own ?Which.

“What is Section 75?

It’s a vital law made in the UK in the 1970s that means your credit provider must take the same responsibility a retailer does if things go wrong with a purchase. In a nutshell…

Pay for something costing between £100 and £30,000 on credit and the provider’s equally liable if something goes wrong.

This isn’t the credit provider being nice. It’s a legal protection put in place so that you’re never in the position of paying off debt for something you didn’t receive or wasn’t as it should’ve been. Whether it’s a flight, kitchen, computer or anything else, pay on a credit card, store card or with store instalment credit and the credit provider’s responsible too.”

I mentioned Section 75 earlier, Sophie, but have never used it and apart from a couple of people who have posted on Which? Convo, I don’t know anyone who has. It would be interesting to know how many claims are made each year and how many are successful. The Which? website also refers to ‘chargeback’ claims that can be made for goods purchased using a debit card and there is no requirement to spend a minimum of £100: http://www.which.co.uk/consumer-rights/advice/how-do-i-use-chargeback

I would expect after the new regulation comes into force to substitute a credit card for a debit card when making any purchase over £100 where a surcharge would otherwise have applied. I expect many other customers would do the same so there will be an increase in unmet costs that ultimately would have to be recovered through the price [or through increased sales within the same overhead – which in recessionary times probably means knocking out some competition].

Obviously some shops would just stop accepting credit card payments and risk losing business. Some might be open to negotiation in some way that provided the cash buyer with a discount or a superior service but be unable to negotiate with a credit card purchaser; some ingenuity might be required to work around any legal stumbling blocks but it should be within the competence of the average British shopkeeper who is generally quite adroit in these matters.

If I was in business I would assume that the customer would pay by credit card and set prices accordingly. I could then offer a small discount to those customers who payed by debit card or bank transfer. Have I overlooked something?

I am not sure Wavechange. I haven’t read a reliable comment on whether that is regarded in law as effectively a surcharge by another name frustrating the point of the EU’s regulation. That is why I suggested a degree of creative subterfuge where some other form of value was introduced into the transaction for cash customers. Perhaps Which? can advise.

I don’t think I would have fared well in business, John.

Yes, why not indeed. There many other examples one of which comes to mind is trainline .com charges a fee for buying rail tickets.

I have not used Trainline since I discovered that I could book the same trains via another company and not paid a booking fee of £1. I see that Trainline have dropped their fee to 75p, but that’s 75p too much when others don’t make a charge.

These charges are totally unfair & must be removed immediately!
As should charges for printing out our own tickets!!!!!!

Good point , Eric – it should be incorporated into the selling price [unless the surcharge is a flat rate on an order irrespective of the number of tickets purchased]. But I expect the sellers have to maintain the fiction that there is a face value on the seat whereas the ticket price for each seat goes up and down with market demand and proximity to the event. Ticket pricing is a bamboozling contrivance that the entertainment industry has been concocting for generations but which has reached its apogee following the introduction of highly sophisticated computer software that effectively manipulates the market and denies the market full knowledge. The market is therefore an imperfect one: opaque and obscure and riddled with distortions . In its present form it is supported by the government because it will not dare to correct it. In my opinion every level of the industry is in it up to its neck despite the occasional protestations to the contrary by certain artistes.

I agree with you, Andy, that this move is a mixed blessing, Traders must believe it profits them in the long run to acccept CC card payments otherwise they would stick to cash and cheques – and give those a wide berth. One of the things to bear in mind is the value of the guarantee a trader gets that the payment will be honoured even if the customer defaults on repayment to the card issuer. That is a form of insurance that must be worth something in the retail equation. They also bring forward sales that would not otherwise not take place for some time and that has a value as well.

Thanks for the reply John. As I trade online only, cash is not an option. I do offer cheque and BACS payment options but very few customers utilise these as it requires more effort on their part (and I might add that banks have already threatened the phase out of cheques so eventually they won’t be an option either). In this day of “convenience”, if it takes more than a few clicks of a mouse then people just won’t bother, they’ll head over to the likes of Amazon or eBay and buy the same thing for a ridiculously low price that I just can’t meet and then pay by credit card so it feels like they’ve not actually spent any money. With the huge buying power the big boys have they can buy at rock bottom prices, sell at a discount and still make enough profit to absorb the cost of credit card transactions.

Regarding the guarantee of honouring payments, that is not the case at all. A credit card transaction takes several days to go through and during that time the payment can be reversed by the bank at any time for any reason. When a customer makes a credit card purchase and it says “approved”, it can take up to a week for the money to appear in my account, however the payment can still be denied by the bank even though the customer thinks it’s gone through. Meanwhile, the customer gets annoyed if I don’t ship the item straight away because they’ve “paid” for it! The only guarantee is that banks will continue to make obscene amounts of money while small businesses (and ultimately, consumers) will suffer.

There really is very little benefit for a small business to accept cards, the only reason we feel we have to is to try and remain competitive and offer as many payment options as we can for the customer, otherwise they’ll just go elsewhere. I don’t believe this is a mixed blessing at all, it is lose lose for both business and consumer alike. If we don’t put a stop to this rampant profiteering by the big corporations that has become the norm these days then eventually there will be no small businesses, and then we’ll all be very sorry indeed..

Andy, it is interesting to hear your side as an on-line trader.

Another side are the small High Street traders who are disappearing as they cannot compete with internet traders. I don’t know of any that make a charge for paying by credit card. Even our local newsagent and butcher accept credit cards although we try to pay them with cash that they still have to pay to bank.

Thank you Andy. While it can take up to a week for the credit card transaction to be processed, once that has happened you do get the payment for the sale even if the buyer subsequently defaults on his or her credit card account.

I can understand that if you can’t take cash because that is not practical with distance selling, and customers will not use the faster payments system or send you a cheque , then you have no alternative but to accept credit card payments. Since all your competitors probably do so as well you are not at a commercial disadvantage.

I hesitate to suggest it . . . but you could join the Amazon Marketplace and have them do the dirty work for you.

Agreed, and I was one of those small high street traders. I started out online and then opened a shop in 2010 but the overheads were enormous and I had to close it after a couple of years and revert to online only. I hate to keep harping on about “greedy corporations” (admittedly, they are a sore point with me!), but the amount of charges levied on us by the utilities companies were nothing short of legalised extortion. And once you enter into a business contract you can kiss goodbye to all the rights you enjoy as a consumer. It’s shut up and pay up, or go bust….

I have no recent experience of using Amazon, but they and other large companies seem to be able to deliver goods quickly even when paying by credit card. For example, rail tickets are often delivered the next day. Have the larger companies a special arrangement that overcomes the delay referred to by Andy?

Well that’s true, but the same can be said of most payment methods. If a customer doesn’t have any funds in their account after their cheque to me has cleared then it’s of no consequence, I’ve already been paid. If the funds aren’t there before the cheque clears then the cheque bounces. Similarly, if the customer defaults on a payment after the bank has processed their credit card payment to me it doesn’t affect me, I’ve already got the money. However, if the default occurs during the payment clearing process then the payment is reversed and I get nothing, even though it may already have been “approved” on checkout.

Don’t even get me started on the fees for selling on Amazon and eBay! They take more than their pound of flesh, and those are on top of the card fees.