As of the weekend commencing 13 January 2018, all fees for credit or debit card payments will be prohibited. This is a long-awaited victory for consumers that puts an end to the needless penalisation for opting to pay for goods or services using cards, whether that be online or in store.
Obviously, this is welcome news to all of us as we become more and more of a ‘plastic operation’ and, as a nation, we’re starting to carry less and less ‘cold hard cash’.
This is particularly true over the last few years when online shopping statistics have soared and the introduction of services such as Apple Pay means we can pay for items by waving our phone, without our wallets even leaving the house.
Consumers have previously been facing hefty add-on fees, or surcharges, on their bills which have typically been around the 2% mark, with the rationale being that companies needed to recover the costs of processing credit or debit card transactions. But that 2%, over the course of a year, can cost British consumers hundreds of millions of pounds, with the figure actually being as high as £473m in 2010, according to Treasury estimates.
The new rule banning surcharges comes from the EU Payment Services Directive (“Directive”) but the UK has actually gone further than necessary in this instance. While the Directive bans Visa and MasterCard surcharges, the UK has extended that to include American Express, PayPal and Apple Pay as well. Although we don’t have a definition of what a ‘UK company’ is (whether that covers companies that are incorporated overseas but have a base in the UK, or just companies that are actually incorporated here), the rule will cover all UK companies that sell to UK consumers.
Just some of the companies that will be affected are – Ryanair, EasyJet, Empire and Hungryhouse. However, it’s not just UK companies that will be affected. Government departments will too, such as the Driver and Vehicle Licensing Agency, which has previously applied a fee of £2.50 for vehicle tax payments by credit card, a process that earns it in the region of £8.5m per year (or 1/10 of Paul Pogba, if you’re a football fan).
What remains to be seen is whether or not UK companies will simply raise their base prices for goods and services, in order to cover the cost of removing the surcharge. Other options would be to simply stop taking card payments altogether or to cleverly try and change the name of the fee somehow.
How exactly this will be policed at ground level, your local corner shop as opposed to a global company or household name, also remains to be seen but this has to be a step in the right direction, pleasing consumer rights groups across the nation.
What Geldards can do
Have you amended your terms and conditions of sale, in readiness for the new system? If not, or if you’re not sure whether you’ll already comply, the Geldards Commercial Team would be happy to assist by providing a review of your legal documentation.
If you would like assistance with these, or any other, issues concerning your business, please don’t hesitate to get in touch with a member of the Commercial Team. COMMERCIAL - EXPERTISE