‘Hidden’ credit card charges to be banned in 2012

23/12/11
News

The Government plans to stop companies charging “excessive” fees when customers use a debit or credit card to make purchases such as holidays and flights.

The Government plans to publish a consultation early next year and are aiming to introduce legislation before the end of 2012.

The Office of Fair Trading (OFT), which enforces both consumer protection and competition law in the UK, said the fees, often added in the final stages of a transaction, should be blocked for debit cards and credit cards.

The government proposals would still allow businesses to make an additional charge for accepting credit and debit card payments but they would only be able to pass on the actual charge and not make a profit from this type of charging.

Consumer watchdog Which? found card surcharges have risen by 1,400% over the last seven years. Which? claimed debit card surcharges were adding £265,000 a day to the cost of flights.

The ban, which could be introduced at that end of 2012, will help reduce the costs for consumers. Some customers are being charged as much as £12 to use their cards, even though the transactions cost 20p to process. In a number of cases, the hidden charges were higher than the value of the item being purchased.

50,000 people support move to ditch fees

The decision will please consumers, as executive director of Which? Richard Lloyd said he was delighted to see “an end to these unfair and excessive charges.”

More than 50,000 consumers supported the action and complained that companies should be required to be more transparent in how the charges are made. Some financial experts have also suggested that credit and debit cards companies should include the amount of the charges in advertisements.

Mark Hoban, the Financial Secretary to the Treasury, said: “We want consumers to be able to shop around. They have a right to understand the charges they may incur up front and not be hit through a hidden last-minute payment surcharge.”

Hoban said Britain would become the first country to implement European Union legislation ending hidden surcharges.

“The Government remains committed to helping consumers get a good deal in these difficult times.” he concluded.