UK plans to ban excessive credit card surcharges - Reuters

LONDON | Fri Dec 23, 2011 9:56am EST

LONDON (Reuters) - Britain plans to ban companies from making their customers pay excessive credit and debit card surcharges when buying flights and other services, ahead of a similar move by the European Union.

Firms will be allowed to add just a small charge to cover their actual costs.

Payment surcharges are especially prevalent in the airline sector, where Britain's Office of Fair Trading (OFT) has estimated that British consumers spent 300 million pounds on such fees in 2009.

"We want to make sure that consumers paying by card do not have to pay excessively high surcharges being imposed on them by some airlines and other businesses," consumer minister Edward Davey said in a statement on Friday.

The ban will apply to most retail sectors, not just the transport sector.

The European Union Consumer Rights Directive will ban businesses in many sectors, including airlines, from imposing above-cost surcharges on payments from mid-2014.

The British government plans to consult on implementing this provision of the directive early, with the goal of banning above-cost surcharges by the end of 2012.

"We need to consult to get those rules right. We need to make sure the right process is in place to help consumers challenge companies that levy excessive surcharges and we need to give business some time to get their systems ready," Treasury minister Mark Hoban told the BBC.

Irish airline Ryanair (RYA.I) said its 6 pounds booking administration charge did not apply to all cards.

"I would not expect the rules to affect us as we don't impose any debit or credit card fees. Our administration charge can be avoided using certain types of cards," said Ryanair spokesman Stephen McNamara.

CALL FOR CHANGE

In June, the OFT called for the law to be updated to stop surcharges on debit card payments after consumer group Which? asked it to investigate.

Which? said card surcharges were often sprung on the customer at the point of payment and could be much higher than the retailers' costs in processing the transaction.

The consumer group singled out low-cost airlines, such as Ryanair and Britain's Flybe (FLYB.L) and easyJet (EZJ.L), which it said charge fees per passenger, per leg of a journey, even though they only have to process one transaction.

Which? said excessive charges were also spreading among cinemas and hotels.

A Flybe spokesman said the airline had been fully engaged with the OFT and the Civil Aviation Authority to ensure that ancillary charges, including card surcharges, were clear from stage one of the booking process.

He said Flybe would respond to the government's consultation by providing details of the costs it faced, "including the card companies' insistence that all airlines lodge substantial cash reserves to cover their losses in case of claims against the card companies."

EasyJet declined to comment.

The UK Cards Association, representing the debit and credit card industry, called the government's move "a terrific Christmas gift for consumers."

(Reporting by Adrian Croft, Paul Sandle, Sudip Kar-Gupta, Conor Humphries; Editing by Hans-Juergen Peters and Erica Billingham)