Travel companies will no longer be able to use hidden surcharges for passengers paying by debit card, says The Office of Fair Trading (OFT).
Companies have been ordered to stop charging extra fees when customers pay with a debit card and to change the way they advertise these extra costs with credit cards.
This comes after consumer group Which? launched a super complaint earlier in the year, which led to a 90-day investigation by the OFT into the issue. It found consumers spent £300 million on payment surcharges during 2009.
Surcharges are added on when consumers make a payment, depending on what kind of card they use, by most travel providers.
But the OFT says these are misleading especially when free payment options are only available to a small proportion of consumers (those with specific cards) making the surcharge compulsory for most.
If firms do not comply, the OFT says it will take action against them using consumer protection laws.
Companies need to be upfront
Which? says the charges customers pay are much higher than the actual cost to the retailer.
It says companies need to be more transparent and tell consumers upfront if surcharges are added – "in plain language in their advertising and promotions".
The process of adding on extra charges for customers paying by card is common and the OFT says this is especially prevalent with the airline sector.
Peter Vicary-Smith, chief executive of Which?, says thousands of people contacted Which? in support of the super complaint.
"We want to see the measures recommended by the OFT put in place as quickly as possible and finally put an end to the practice of card surcharging.
"While we understand that some of the regulatory changes will take some time, we urge the OFT to take steps immediately to ensure that consumers know the true cost of their purchases up-front," he adds.
Commitment to change
Cavendish Elithorn, senior director of the OFT's goods and consumer group, says consumers find it harder to shop around and find the best deal if they have to invest time and effort to avoid surcharges.
"We recognise that most traders want to treat their customers fairly. Many already meet the minimum standards we expect under the law and we have secured a clear commitment to change from others.
"However, we will take enforcement action against any businesses that do not respond to today's announcement and instead continue to use misleading surcharging practices," she adds.