On 13 January 2018 the government banned all businesses from charging credit and debit card surcharges to UK based consumers. This means that no additional charge or fee can be levied upon someone who wants to pay by card, or by a specific card.

The ban applies to transactions between businesses and individual consumers and even extends to payments of tenancy deposits in residential tenancies.

The Regulations can be found here.

In particular, Regulations 4 and 5 state:

Regulation 4

  • 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.

Regulation 5

Contracts where Regulation 4 applies:

  • Regulation 4 applies only if the use is as a means for the consumer to make payments for the purposes of a contract with the trader, and only to the extent that that contract—

(a) is a sales or service contract, or a contract (other than a sales or service contract) for the supply of water, gas, electricity, district heating or digital content, and

(b) is not an excluded contract.

It is worth noting that landlords can make an additional charge in respect of rent payments as residential tenancy agreements are excluded contracts for the purposes of Regulation 5. However, they will not be entitled to impose surcharges on payments for tenancy deposits or holding fees.

Up until 13 January 2018, landlords and letting agents were allowed to impose additional surcharges when taking tenancy deposit payments via credit or debit card. The reason why landlords obligated tenants to pay surcharges when taking deposit payments was to cover the costs they had incurred to credit card companies, such as Visa and MasterCard, for processing the payment. Fortunately for tenants, the new Regulations now make the additional surcharges on credit and debit card payments unlawful in most cases.

The ban applies to deposit payments made by cash, face to face, bank transfer, online banking, over the telephone, PayPal, Apple and Samsung Pay and other e-money services and mobile applications. From the tenant’s perspective, the protections granted by the Regulations over the method of payment is wide ranging and applies to all forms of modern day payment methods.

I am a landlord, how shall I take deposit payments from tenants?

Landlords should not levy an additional surcharge for processing deposit payments as this would contravene the Regulations. It is, therefore, advisable that landlords take deposit payments face to face and/or provide tenants with clear and concise information as to what they have paid.

Alternatively, landlords could take a cash payment as this would not carry the burden of bearing the expensive costs that comes with processing card payments.

What are the consequences of non-compliance?

If landlords do not comply with the Regulations and continue to levy additional processing charges on tenants for making deposit payments by card, tenants would be entitled to a refund. If landlords persistently refuse to refund tenants for taking the additional fee, the consequences for non-compliance are very serious. Tenants would then have the right to redress by pursuing legal action against the landlord or referring the matter to the local authority trading standards or the Competition and Markets Authority.

How can landlords avoid the consequences?

Enforcement and litigation can be stressful, time consuming and could cost landlords much more than the price they had to pay in order to ensure compliance with the Regulations.

There are several ways in which landlords can protect themselves from facing the severe consequences of non-compliance.

These include:

  • Discontinue the imposition of additional charges on tenants for processing the deposit payments. Instead, landlords could bear the full costs of processing the deposit payments themselves. If landlords are happy to pay the costs of processing card payments, they would also be entitled to negotiate lower fees with the relevant card company;
  • Stop accepting deposit payments made with credit or debit card and in the alternative, landlords could require deposit payments to be made by cash upfront; or
  • Pass the costs of processing deposit payments as booking fees or administration fees. However, this would require then landlords to ensure that the booking and administration fees are also implemented on all other payment methods.

Further guidance on the credit card surcharge ban can be found here.