Government pushes forward on surcharge ban


The long-promised government crackdown on excessive debit and credit card surcharges could finally be in sight.

There's no official cut-off date for the surcharges yet. However, on Sept. 1, Consumer Affairs Minister Norman Lamb announced that the government has launched a consultation to determine how and when it will start limiting surcharges.

The problem with surcharges
Surcharges -- fees tacked onto online purchases for the "convenience" of using a debit or credit card -- have long been controversial. While online businesses do incur some extra costs for processing cards, the surcharge amounts often go above and beyond covering those costs. What's worse for customers, the charges are often not disclosed until the very end of the transaction process.surcharge-fees

Over the past year, excessive surcharges have come under attack. Consumer group Which? filed a super-complaint with the Office of Fair Trading (OFT) about the surcharge fees in March 2011. Then, in October 2011, the European Union adopted the Consumer Rights Directive, which requires EU member states to prevent businesses from charging excessive surcharges (surcharges that exceed processing costs).

EU nations have until June 2014 to make the Directive's provisions national law. Yet the UK government, at the end of 2011, committed to a goal of abolishing excessive surcharges earlier -- by the end of 2012. The consultation recently announced by Lamb seeks to determine how best to accomplish that goal.

What's the consultation all about?
The Department for Business, Innovation and Skills launched the consultation into surcharges Sept. 3. This progress is something of a victory for tens of thousands of consumers who have campaigned against the fees.

The key issues up for discussion during the consultation (which is set to end in October) include:

  • Should the Consumer Rights Directive's provisions on surcharges go into effect early (before June 2014)?
  • How much of the processing cost can a business pass on to the consumer?
  • Which types of businesses will be involved in the ban?
  • What will the penalties be for businesses that don't comply?
  • What will the downsides and costs be for merchants, if the surcharge provisions go into effect early?

Individuals and organisations alike have the ability to offer input, via this survey.

Consumers to benefit from greater transparency
The Office of Fair Trading, meanwhile, is conducting its own work into the issue, ensuring that retailers make any add-on charges as transparent as possible and is considering enforcement action against any that fail to change their practices.

Limiting and disclosing surcharges should make the payment process more transparent, with consumers being made aware of the costs they are committing to early on during their transaction.

"It can often be frustrating when purchasing a product or a service online, to find out only towards the end of the transaction that the final price is much higher due to things like payment surcharges," Lamb said in a statement. "These proposals will stop companies from adding on these excessive charges and allow consumers to see a clearer and more transparent breakdown of what they are paying for."

Which? has welcomed the government's commitment, with executive director Richard Lloyd describing it as "a step in the right direction." More than 50,000 people supported the consumer group's campaign to ban excessive fees, and recent research by the organisation indicates that 84% of consumers do not believe there should be any extra charge for paying by debit or credit card.

However, Lloyd insisted: "The government must now act quickly to meet its promise to ban these excessive charges by the end of the year."

See related: Airlines agree to be upfront about surcharge fees, OFT demands credit card surcharge transparency

Published: 7 September 2012