The Department for Business, Innovation and Skills (BIS) has announced new proposals to prevent consumers being unfairly charged for using payment methods including credit or debit cards. 

A new consultation was launched by BIS on 3 September 2012 to look at banning “above cost” payment surcharges.  The consultation focuses on one part of the EU’s new Consumer Rights Directive (CRD) which is in the process of being implemented in the UK.  A separate consultation process is already under way in relation to the remaining parts of the CRD – see here.

The proposal is to limit what traders can charge their customers to the amount that it actually costs them to process the payment in question, eliminating any “profit” element over and above the actual cost to the trader.  Consumers will benefit from generally being aware of the level of costs they are committing to.  Traders should also benefit as the proposals should put an end to the current lack of transparency on charging practices – with some traders, particularly in the online world, luring customers to less competitive offers when payment surcharges are taken into account.

These proposals follow on from an investigation and enforcement action undertaken by the Office of Fair Trading (OFT) into payment surcharges in the airline industry which completed earlier this year.  This action has led to airlines changing their pricing practices such that previously “hidden” surcharges are now included in headline prices, and optional credit card fees are presented clearly and transparently.  In future this means that “free” payment by debit card will be the industry standard for UK passengers, with fares adjusted accordingly.

The consultation on payment surcharges is open for responses until 15 October 2012.