U.K. Bans ‘Excessive’ Payment Card Surcharges (April 8, 2013)
A U.K. ban on merchants imposing “excessive” surcharges when consumers pay with credit or debit cards that went into effect April 6 could mean fewer surprises for consumers that previously complained about getting stung with unexpected transaction fees when paying for airline and rail tickets and other online purchases. But some observers say the new rule adds yet another wrinkle to a growing global debate about payment card surcharging. The new U.K. rule requires any merchant surcharge on a payment card transaction to reflect only the “actual cost” of processing payments. The rule also requires merchants to disclose such fees upfront so consumers may compare product costs before finalizing purchases. The U.K. Office of Fair Trading’s investigation over the last year suggested that the majority of merchants did not add surcharges for payment cards, but “excessive” surcharges were widespread in the transportation industry.
The new rule could bring relief to consumers frustrated with surcharges, but the actual surcharge limits remain vague, suggests Zilvinas Bareisis, a senior analyst with Celent. “The new rules leave too much ambiguity and leeway for merchants to decide what they consider processing costs” to be, Bareisis said in a recent company blog post. Payment card surcharging rose to the fore in the U.S. last year as a result of a long-running settlement against Visa and MasterCard that gave U.S. retailers beginning this year the right to impose a surcharge fee for credit card transactions at a rate of up to 4 percent of the transaction total. Some observers have suggested credit card surcharging could generate consumer confusion and dampen payment card usage, but most large U.S. retailers have said they have no plans to implement surcharges.