With effect from 13th January 2018 traders will be banned from charging consumers any surcharges based on the consumer’s payment method on nearly all retail transactions within the EEA courtesy of the Payment Services Regulations 2017.
The Payment Services Regulations implements the second EU Payment Services Directive (which contained a prohibition on surcharges for the use of credit and debit cards in consumer transactions) but the UK Government has gone further than the Directive in the Payment Services Regulations and included within this prohibition other forms of electronic payment such as PayPal.
The rationale for the ban is that it should go further in protecting consumers, helping to ensure a level playing field for all types of payments and transparency on price, which in turn should assist the EU’s goal of a harmonised single digital market.
The Payment Services Regulations amends and sits alongside the existing Consumer Rights (Payment Surcharges) Regulations 2012. Previously under the Consumer Rights (Payment Surcharges) Regulations 2012 traders were prevented from charging excessive surcharges based on the payment method but could charge a reasonable surcharge based on the direct actual costs incurred by the trader. This still remains the case for business to business transactions (where a reasonable surcharge can still be imposed) but the Payment Services Regulations absolute ban will apply where a trader is selling to a consumer who uses a method of payment covered by the Payment Services Regulations and both parties are using payment service providers located in the EEA. If one of the payment service providers of the trader or consumer is located outside the EEA or the payment instrument used is outside the scope of the Payment Services Regulations, then a reasonable surcharge may be imposed. In the majority of retail transactions in the UK this is unlikely to be the case.
Limited surcharging is permitted for certain consumer contracts such as contracts for the supply of water, gas, electricity, district heating and digital content.
The Payment Services Regulations apply to all payment transactions however they are concluded whether in store, online or by telephone. Surcharges applied in breach of the Payment Services Regulations will be unenforceable and consumers can demand a refund, in addition consumer enforcement authorities (such as Trading Standards) are empowered to can take enforcement action against defaulting traders.
Booking and handling fees are not considered to be surcharges provided they do not distinguish between payment types.
It will be interesting to see what behaviours this change in the law drives and it is anticipated that many retailers will simply refuse to accept certain credit cards which carry a higher transactional cost for the trader as well as increasing headline prices to absorb the cost internally.