Excessive fees for using a debit or credit card to buy items such as travel, concert, football or cinema tickets will be banned by the end of 2012, under new government plans. The move comes amid complaints that airlines, booking agencies and even councils were imposing excessive charges for using a card.
As many of you know, consumers buying online tickets are regularly charged a significant amount when paying by credit or debit card. The sum paid is often disproportionate to the sum to be paid and the actual cost to the retailer or supplier (usually around 2-3% of the sale cost). One further issue is that some suppliers’ websites only make that sum visible after the consumer has ploughed their way through a number of pages to get to the checkout thus, in effect, making the charge less visible.
Examples of charges which have received considerable scrutiny are a £6 per person, per leg "administration fee" charged on all but one card by Ryanair, a £4.50 per booking credit card fee from British Airways, and a charge of up to 17 Euros (£14.16) per person by Air Berlin. In terms of the concert ticket agencies, their “service charges” can be as much as 14% of the cost of a ticket. For example on one agency's site, a £20.00 ticket for Phantom of the Opera costs £22.80 and that’s before postage costs have been added on.
Easy Jet are trying to get around these regulations it would appear by introducing a £9 flat administration fee to replace the previous £8 booking fee levied on anyone paying with most debit cards. That is, previously Easyjet charged £8 for all bookings made with a debit card, except for those by Visa Electron. The charge for credit cards was £8 plus 2.5% or £4.95, whichever was greater.
The issue of high surcharges prompted the consumers' association Which? to call on the regulator to investigate, saying "the price you see should be the price you pay".
The regulator, the Office of Fair Trading (OFT), published a report in June about the travel industry's use of surcharges. It said charges must be clearer and surcharges for using a debit card should be banned.
The government is planning to go further than the OFT's recommendations and change the law so all excessive surcharges are banned. What the government are therefore doing is bringing forward the implementation of new European Rules (Consumer Rights Directive), which were pencilled in for mid-2014. These rules, amongst other things, say that only the actual cost of processing card payments could be charged to consumers.
The process of accepting credit or debit cards as payment is quite complex and retailers, quite rightly, are keen to point out that they have to absorb this cost in their sale price. Indeed, Ryan Air responded to the government's announcement by saying that it charged an administration fee which also covered the cost of running the website rather than a surcharge.
However, it is one thing absorbing a 2-3% charge and another being charged £8 for a £75 flight on a budget airline. In this regard, the OFT calculated that travellers spent £300m on card surcharges in the airline industry alone in 2010.
The government will shortly launch a consultation and legislation is expected to follow. It can not come too soon.