Who: HM Government
When: 18 December 2012
Where: United Kingdom
Law stated as at: 7 January 2013
In respect of what has always been a controversial issue, the Consumer Rights (Payment Surcharges) Regulations 2012 (the “Regulations”) have now been signed off. They will come into force on 6 April 2013.
These effectively prohibit retailers from imposing ‘above cost’ payment surcharges on consumers using certain means of payment i.e. debit and credit cards.
Any payment surcharges imposed by retailers on sales contracts entered into on or after 6 April 2013 must not exceed the actual cost to the retailer of processing that method of payment; in practice this is approximately 15p for a debit card transaction and 2% of the transaction value for a credit card transaction.
The rule will not apply until 12 June 2014 for sales by “micro businesses” (less than ten employees) and new businesses starting up between 6 April 2013 and 12 June 2014.
Why this matters:
It is common practice across various industries, including passenger airlines, to impose a payment surcharge on consumers when they choose to pay with certain debit or credit cards; a charge which is rarely included or noted in the advertised price and often only comes to the consumer’s attention after they have invested considerable time and effort in the booking process.
The value of payment surcharges and the policy for applying these vary widely across and within industries to the extent that a consumer cannot reasonably predict the value of a payment surcharge or use an approximate value in order to compare the cost of similar goods or services across a range of retailers.
This inevitably distorts competition amongst retailers in the market as the consumer is unable to make like-for-like comparisons and retailers who have taken a responsible stance on advertising their policy on payment surcharging from the outset find that they are at a disadvantage to retailers whose advertised prices do not reflect payment surcharges.
The Regulations implement Article 19 of the EU Consumer Rights Directive into UK law; it remains to be seen if further legislation will tackle the advertising of payment surcharges. The Regulations are intended to provide consumers with clarity on surcharges so that they can calculate the total price to be paid and compare prices across the market with greater ease.
Some may say it is questionable whether this can be achieved without an obligation on retailers to advertise the value of their payment surcharges up front. On the other hand there is an argument that even before the Regulations come into force, the advertising of prices which exclude any such charges constitutes an “unfair commercial practice” that gives rise to an offence under the Consumer Protection from Unfair Trading Regulations, as well as a breach of the CAP Codes.
The Regulations put a stop to exorbitant payment surcharges, but in practice this may not translate into a cost saving for consumers as retailers will simply compensate for this lost source of revenue by hiking up the price of the underlying goods or services.