The Government recently announced new rules that will come into effect on 13th January 2018 which will mean businesses cannot surcharge customers for paying by card or other payment services. This change is the result of an EU directive that relates to Visa and MasterCard surcharges. The directive, known as the Payment Services Directive (PSD2), will make it illegal for any business to charge extra for using a debit or credit card in the EU. However, the UK is going further by banning charges for American Express cards and users of services such as PayPal and Apple Pay. Since 2013, under the Consumer Rights Act, businesses can only pass on charges that genuinely reflect their costs. That means the amount that the bank charges them to process a credit or debit card payment. Typically, that is about 10p or 20p for debit cards, or about 0.6% of the transaction cost for a credit card. However, banks tend to charge small businesses much higher rates, so they have been allowed to charge customers accordingly. Businesses have argued that they do face extra charges when someone pays by credit or debit card. It is claimed that UK retailers spent some £800m on such charges last year, even though the fees have been previously capped by the EU. (see previous emails – link to articles of 22/7/16 & 6/8/15 please) One option is that some companies will put up prices to compensate, however, the Treasury hopes they will be discouraged from doing so in order to remain competitive, as their headline prices will now become more transparent. It will not be illegal, under the new directive, for retailers to have a £5 or £10 minimum spend before accepting a card transaction. However, as consumers switch away from using cash, many may not want to risk losing their business. It will be up to Trading Standards and the Competition and Markets Authority to enforce the ban against those businesses who continue to impose card surcharges after 13th January 2018. The Treasury said firms caught breaking the law would be forced to reimburse customers and face fines. The directive has already been incorporated into UK law, following a vote in parliament in March this year. It will, therefore, remain law after March 2019, when the UK leaves the EU. However, as with all law, it could, in theory, be repealed at some point in the future.
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