Holiday Cheers for Consumers from the UK Treasury

Just before the country stopped to celebrate Christmas, the UK Treasury announced that the government plans to ban the 'excessive' fees for card payments before the end of 2012. Essentially, this is the ban for card surcharging, i.e. fees that get added to the transaction if the person chooses to pay by card. Unfortunately, in Europe surcharging is quite widespread. When I was regularly travelling to Denmark, I used to pay a fee for pretty much all card transcations. Here in England, consumers rarely get charged by brick-and-mortar retailers, but are quite often hit by charges from online merchants, especially the airlines and various ticketing agencies. As a consumer, I find it really annoying, as these fees are not made transparent until late in the checkout process. So, you think you are getting a good price, only to find out that you've been slammed with an extra fee just to pay by card. The surcharges have already come under scrutiny. Earlier this year, Which?, a consumer group, complained about the surcharges which prompted an investigation by the Office of Fair Trading (OFT). The European Union also has approved the new rules giving the European shoppers more rights when returning goods or paying by card, but the rules are unlikely to be implemented until 2014. So, the latest announcement by the UK Treasury expected to come into force by the end of 2012 is a welcome step towards limiting surcharging and increasing price transparency. It will be interesting to see how this will be implemented - what level will be deemed as "excessive", how the compliance will be monitored and how any breaches will be penalised. There is a clear difference between a small mom-and-pop store charging £0.35 to recoup their additional cost of a card transaction and the likes of Ryanair, a so-called "budget" airline, charging £12 per person for booking a return flight. The other question, of course, is that of the alternatives - at a physical store, I can perhaps pay cash to avoid card fees, whereas online, the card is often the only payment method available. The Office of Fair Trading report has been arguing that the fees should not be applied to at least debit cards, as they represent the equivalent of cash in the digital world. The Treasury's proposal seems to go one step further and limit the fees to credit cards as well. Will it reduce the ultimate price consumers have to pay? Possibly not, as the retailers can easily just add the today's fees to tomorrow's prices. Yet, it would be a big improvement, as consumers could more easily shop around and compare prices knowing that they wouldn't be charged for the privilege of parting with their money. Given the background of all the gloomy reports about recession, rising unemployment and other bad news, the Treasury announcement should bring the holiday cheers to the UK consumers.