Businesses which add extra fees or charges to the price of a consumer purchase based on a method of payment (typically a debit or credit card fee) need to examine their practices. The Consumer Rights Directive must be implemented into national law by all EU member states (including the UK) by 13 December 2013, and be brought into force by 13 June 2014.
One aspect of the Directive (under Article 19) will be to ban traders from charging customers any fees that exceed the actual cost to the trader of using a particular method of payment. Businesses will remain able to charge the consumer the actual costs of processing any particular form of payment, but cannot add to this.
Article 19 states that 'member states shall prohibit traders from charging 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 such means'.
The Government has proposed to implement Article 19 early in the UK, and closed its consultation on the proposed ban on above-cost payment surcharges on 15 October 2012. The Office of Fair Trading’s (OFT) response to the consultation supports early implementation of this ban, as it believes there is a 'potential for payment surcharges to distort the headline price and restrict a consumer’s ability to compare prices'.
The Directive excludes certain sectors from its scope, for example social services, financial services and gambling. In the Government consultation, it asked stakeholders if they agree that these sectors should fall outside the above-cost payment surcharge ban. The OFT said that it would like the provisions to apply to all sectors, as it is keen to prevent confusion for consumers and businesses in the implementation of the ban. The OFT would 'welcome extending the payment surcharges provisions to all sectors unless these are specifically covered by existing provisions which would have a similar effect as Article 19 of the Directive'.
The consultation also asked for views on whether costs to business such as 'IT, risk management, fraud and operational costs' could be costs 'borne by the trader' (within the meaning of Article 19) for which a business could legitimately charge. The OFT’s view is that for these purposes a cost 'borne by the trader' (which a trader would be entitled to pass on to the consumer) should be interpreted narrowly. These costs should also be clearly defined to ensure that a consumer can easily compare prices of different retailers. In addition, the OFT’s view is that retailers should not be entitled to rely on this to pass on wider IT and operational costs (such as the infrastructure cost of accepting payments online) in the surcharge. The general costs of accepting payments online should be taken into account in the headline price in the same way as any other necessary overhead. Therefore, the costs which may validly be included in any payment surcharge should only reflect the cost to a business of accepting a specific card.
The Government’s response is due by 15 January 2013 at the latest.