Chancellor to axe rip-off credit card surcharging

23rd December 2011  

In a carefully timed move designed to gain maximum brownie points for the Government over the Christmas holiday, the Treasury has announced that it’s to force retailers to scrap the universally despised credit card surcharges that are spreading to all areas of retailing.

In a year where many consumer bodies as well as journalists have fought crusades to highlight the unfairness of the often hidden charges, it’s taken Government action to finally see the writing on the wall. With consumer morale at its lowest point in three years, the move will be well received by the public. But the beleaguered travel and airline industry clearly won’t be celebrating the news of a further dent in its margins, just before the start of its key new-year business period.

Although the Government announcement is good news for the consumer, the end of excessive card surcharging was already in sight as new European rules due to come into force in 2014 already state that only the true cost of processing card payments could be charged to customers.

Criticism of the dubious practice has escalated over the last three months as it’s become apparent that many companies are deliberately hiding the credit card surcharges and only revealing them at the end of complex buying processes. The Government has stated that the surcharges as well as being unjustified also stifle competition as they prevent consumers easily comparing prices between retailers.

When interviewed on the Today Program on BBC Radio 4, Financial Secretary to the Treasury Mark Hoban said

“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.”

The UK Office of Fair Trading (OFT) recently calculated that travellers spent over £300m on card surcharges buying tickets in the UK airline industry alone in 2010. Arch villain of the surcharging airlines Ryanair said in response to the government’s announcement that it only charged an administration fee which covered the cost of running its website, it didn’t charge a credit card surcharge per se.

One senior Treasury source went onto say

“We want this to go as wide as we can to prevent excessive charges.”

Under the new plans, retailers won’t be allowed to make unwarranted payment surcharges. However, they will be able to make a small charge to cover the actual cost they incur for processing a particular form of payment.

Under current charging structures, this is likely to cap credit card charges at a maximum of 2 per cent per transaction, and debit card charges at about 20p per payment. Airlines, travel firms and online ticket agencies (and recently many other sectors of retailing) regularly charge 3 or 4 per cent for credit card payments.

Self-styled consumer’s champion Which? spearheaded the campaign against surcharging with a Super-complaint to the OFT earlier this year.

Executive Director of Which? Richard Lloyd, applauded the news and immediately called for companies making the detested charges to act on it instantly to eliminate them.

Richard said

“The Government’s decision to ban rip-off debit and credit card surcharges is a huge victory for consumers. More than 50,000 people supported the Which? campaign to see these fees stamped out.

“This announcement goes further than the Office of Fair Trading’s proposals, finally putting an end to these unfair and excessive charges.

“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.’

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