Time to say goodbye to ‘rip off’ surcharges

I note the DVLA are still charging a flat rate £2.50 regardless of the actual cost of the tax disc.

Seadog says:

21 September 2017

As of Sep 21 2017 the UK government (aka DVLA) are still charging £2.50 for credit card transactions. In my case this amounts to about 8% of the amount being paid. So much for the new regulations designed to prevent excessive charges for card transactions.

wavechange says:

Here is a link to the super-complaint and the OFT response.

Well done Which? 🙂

I wonder if the Fixed Means Fixed campaign to prevent mobile phone companies from raising monthly prices during a contract might be the basis of another super-complaint. Sorry to be off-topic.

Patrick Steen says:

9 April 2013

Thanks for the comment Wavechange. Our formal complaint to Ofcom was accepted and it launched a consultation off the back of it, just as the OFT did so here. As you know, we’re awaiting the outcome. But it’s best to talk about it here: https://conversation.which.co.uk/technology/fixed-means-fixed-mobile-price-rise-ofcom-consultation-response/

Martin says:

Just one clarification. Personal debit cards do indeed cost a pittance to process, but ‘Business’ or ‘Commercial’ debit cards are charged pretty much the same as credit cards, i.e. somewhere between 1.2% and 2%.

I know someone who is very senior in the payment card industry, who confirmed that the cost of processing to them is exactly the same as for personal debit cards, and the reason for the higher charges is ‘because we can’.

Also, Cardholder Not Present surcharges have been increased recently, so expect to pay a higher surcharge if you’re not there to enter you PIN.

I’m a small business owner, and my card charges are entirely in line with the new rules. I don’t charge for personal debit card payments, and I charge 2% for UK credit and business debit cards, and 3% for non UK cards of all types. Some months I win by a few quid, other months I lose by a few quid.

NFH says:

The relevant law is Section 4 of the Consumer Rights (Payment Surcharges) Regulations 2012, which states:

A trader must not charge consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of that means.

Does this also apply to electricity and gas companies who charge a higher price for energy when the consumer doesn’t pay by direct debit (e.g. by bank transfer or debit card)? Clearly where the price of the energy is higher because of the payment method used, the difference in price exceeds the costs borne by the energy supplier.

anon the mouse says:

Interesting point, one I’ll happily put forward to my energy supplier as I pay more for pre-payment meters.

Indranil Banerjee says:

We all forget the basic essence of a card transaction – it was to facilitate the seller to get more custom and the buyer the convenience of not carrying ready cash. Just as I, as a consumer cannot demand a commercial establishment – online or brick and mortar – to accept cards, similarly it is absolutely unfair to charge/demand any commission whatsoever to a customer as it is the establishment which had decided to accept such tranactions with a motive to make his business popular and accessible to as many as possible.
The presnt action will stop the gross unfair trade practices, but in the long run, especially in online transactions, such charges are to be totally abolished.

George Mellar says:

12 April 2013

I support this point of view entirely, suppliers are free to decline payment by card if they want to, but must accept that customers have a right to go elsewhere if they do so.
This is how it always was, and it is just greed and customer apathy that allows any supplier to get away with it.
Its like buying an item by post that’s post free. Of course its not post free, but the customer knows the cost and decides whether to buy or not.

wavechange says:

12 April 2013

I have no problem with a credit card surcharge because there is a significant fee for the transaction. The surcharge should reflect the actual or average cost of the transaction and not used to generate a profit for the retailer.

I would like postage and packaging costs to reflect the actual cost too.

NFH says:

I notice that Admiral insurance are still charging a £5.95 flat fee for payment by credit card. As I was paying premiums for two cars in one go, I didn’t mind as the fee was around 0.6%, much less than the value of the rewards given to me by my credit card issuer. Is insurance exempt as “financial services” and why did the government decide to exclude financial services from the legislation?

NFH says:

I’ve found the answer to my own question. Regulation 5(2)(d) excludes insurance from the legislation. Why did they make such an exclusion? It makes no sense.

JohnH says:

I get charged a 7% fee on credit/debit card transactions by an estate agent – will this new ruling change that?

You need to look at the exemptions because there are a lot of sectors that are totally exempt.

I imagine the law will have an effect particularly on big businesses.

As someone who is meant to be enforcing these Regulations I imagine our department will do little if anything – we simply have too much other stuff.

The legislation itself is worded badly and opens up for massive debates between a business and regulators. What if we don’t agree with what a business is charging? Are we going to spend a lot of man hours going through all of their accounts trying to work out what processing payments costs?

The law can only be enforced through the civil courts and that costs a lot of money.

Whilst the addition of the law is a good thing the Government should back it up with enforcement staff funding. They could also add in penalties – why not make a minimum fine for those found flouting the law?

anon the mouse says:

One thing, civil courts are not expensive… To initiate proceedings defend in them.

I believe to get a case through the civil courts we have to hire external solicitors as Trading Standards are not (currently) allowed to represent themselves in civil court. Therefore that is an immediate concern when considering civil action.

NFH says:

You don’t need to hire a solicitor to start a claim in the Small Claims track of the County Court. It costs £30, recoverable from the defendant, and can be initiated at http://www.moneyclaim.gov.uk

I very much doubt taking enforcement action through the civil courts is the same as a simple contractual dispute.

Also we cannot actually take action in the court ourselves – there is some sort of legal restriction on this type of action. Its explained on page 40 of this document

NFH says:

Regulation 10 of the Consumer Rights (Payment Surcharges) Regulations 2012 states:

“Where a trader charges a fee in contravention of regulation 4, the contract for the purposes of which the payment is made is to be treated as providing for the excess to be repaid to the consumer.”

Therefore if a retailer refuses to refund an excessive surcharge, you could issue a County Court claim and recover both the surcharge and the £30 court fee from the retailer as a straightforward breach of contract.

Indeed – though I am talking about Trading Standards enforcing the law by requiring a business to change their ways

The individuals right to claim their money back is a separate part of the law.

Em says:

@NFH – Why bother?

If a trader is prepared to ignore this regulation, they are likely to ignore others. Do you still want to do business with them, even after they have been forced to comply by the courts?

What this does is make it clear to legitimate traders that the practice of enhancing their profits through excessive transaction charges is no longer acceptable. Seek out those traders and give them your business.

It is only because consumers are not discriminating in the first place that we get ourselves into these situations. If nobody was prepared to pay excessive surcharges for credit cards there would be no need for this latest action. Mobile phone companies charge too much money for international calls because there are enough stupid people willing to pay the prices charged.

NFH says:

That doesn’t really work. In many cases, the consumer has already invested considerable time in researching a product, only to be confronted with a payment surcharge at the end of that time-consuming process; it is a form of drip-pricing. Many will just give up and pay the surcharge. The legislation gives the consumer the right to reclaim any excessive surcharge paid. If all consumers took action against the offending retailers instead of simply avoiding them as you suggest, then it would stamp out the practice quickly. The “can’t be bothered” approach does little to change retailers’ behaviour.

wavechange says:

I see little chance of getting the public to reject excessive surcharges en masse.

Individuals can take action by boycotting companies or looking for ways of avoiding these charges. For example to avoid debit card surcharges I have paid by cheque or cash. I don’t want to do this and I invariably whinge about it, but there is a matter of principle and no point in wasting money.

NFH says:

It only needs a significant minority to claim back charges through Regulation 10(b) to cause problems for these retailers. Many such retailers operate on an automated basis and the need for constant human intervention to refund excessive surcharges would make it more trouble than it’s worth for them, particularly if each case gets as far as a Court Claim claim.

wavechange says:

If the mobile phone companies were worried about human intervention they would not be putting up prices mid-contract and having staff deal with a large number of hostile customers. It would be great if we had more people who are prepared to invest more time in making Court Claims but I suspect that those prepared to do this would be the ones who manage to avoid paying surcharges in the first place.

Maybe we need a philanthropist who would pay for Which? magazine to go to every household in the land or to fund a consumer advice programme on TV. Only when we get more people interested in consumer affairs will we stand a good chance of achieving effective and timely action against those companies that choose to treat consumers unfairly.

richard says:

Interesting – Before I started electronic transactions – I checked the cost of my transactions When I didn’t like the charges I changed companies – Worked well.

NFH says:

That’s easier said than done when a retailer uses drip pricing, whereby the retailer adds to the original price of a product as the consumer goes through the buying process. OFT evidence suggests that consumers will often continue with a purchase in these situations because of the time and effort they have already invested in getting to that point in the transaction even though this may result in them paying a higher final price than they expected to based on the headline price and in comparison to what competitors are offering. See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/32703/12-1008-consultation-ban-above-cost-payment-surcharges.pdf for a full explanation.

wavechange says: