Debit card surcharges 'must be banned'
Consumer champion Which? has stepped up its campaign against card surcharges, calling for a change to the law that would ban debit card charges.
Consumers are collectively paying more than £265,000 a day in debit card surcharges to airlines, even though a simple law change could outlaw them, says Which?.
Since 28 June, when the Office of Fair Trading (OFT) announced card surcharges were unfair, Which? estimates that customers have paid £18 million in airline surcharges.
This is in spite of a Which? super complaint against the practice in March and the OFT calling for such charges to be banned.
A call for action
Executive director of Which? Richard Lloyd is calling for action: "With most airlines yet to drop these card surcharges and some introducing new fees, it’s time for the government to put a stop to this.
"A minor change to the law is all it would take to ban the charges on debit cards that you only find out about at the end of a lengthy online booking process."
Amending article 52 (3) of the Payment Services Regulation would only allow credit card surcharges if they meet OFT guidelines and would see an end to debit card surcharges. Vendors would also have to be much clearer to consumers about fees and charges.
Which? is urging consumers to email financial secretary to the Treasury Mark Hoban to ask the government to step in and take firm action.
"Thousands of people have complained to Which? that these hidden card fees are unfair. The government must act so that consumers can easily compare the cost of their flights," says Lloyd.
Visit www.which.co.uk/surcharges to register your support.
Card surcharges Q&A
What are card surcharges?
These are fees levied by organisations on customers for paying by card. Online retailers –and the travel industry in particular – often charge these fees under the pretext that it costs them to process card bookings.
Individual companies charge different rates, although they tend to be around the £4 mark. However, critics argue the cost of processing a card payment is substantially less than the fees consumers have to pay.
How do companies get away with charging them?
Customers of budget airlines Easyjet and Ryanair no longer pay card surcharges, they pay a ‘booking fee’ instead. So language is one way round it. Companies also argue that customers don’t have to pay the card fees if they choose an alternative payment method.
So how can I avoid the fees?
If you still have an Electron card use it as most vendors don’t tend to charge for paying with them. Getting your hands on a new card is tricky though: Halifax is the only bank to offer new bank accounts with an Electron card to its adult customers and this is for its basic bank account called Easycash.
Depending on the company, you may incur reduced fees by using a prepaid card. Ryanair, for example, waives booking fees if you use a prepaid MasterCard.
What is Which? and the OFT doing about the charges?
Which? issued a super complaint calling for surcharges to be outlawed, but as a campaigner for consumer rights it can only apply pressure. And as the OFT is a trade body, although it can advise and recommend that card surcharges should be banned or explained more clearly it doesn’t have the power to enforce these recommendations.
However, the fact that the OFT agrees with Which? should get the government to take notice but the lack of government action so far means it looks like it will take more consumer pressure before it will commit to anything.
A complaint made in the UK by a government-approved watchdog or consumer organisation on behalf of consumers which is then fast-tracked by the Office of Fair Trading (OFT). For a super complaint to be valid, it has to be about a “market feature, or combination of features, such as the structure of a market or the conduct of those operating within it, that is or appears to be significantly harming the interests of consumers”. In March 2011, the OFT received a super complaint from consumer watchdog Which? asking the regulator to investigate excessive surcharges imposed by issuers of credit and debit cards.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.