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Government ban rip-off card payment charges

Credit card on a computer keyboardRetailers will be banned from imposing rip-off charges on customers when they pay by debit and credit card.

The Government has today announced that it will ban excessive card surcharges before the end of 2012.

Businesses will only be able to add a small charge to cover their actual costs for using any particular form of payment.

Hidden charges and booking fees came top of a Confused.com poll of “most annoying rip-offs”.

Worst offenders

Ryanair charges £6 per passenger per one-way flight if they pay with a credit or debit card. This means a family of four would pay £48 extra for a return trip.

EasyJet charges £8 for debit card payments and for credit card payments the cost is even higher - £8 plus an extra £4.95 or 2.5 per cent of the flight price, whichever is higher.

The DVLA, cinemas, theatres and concert promoters also levy these card surcharges.

Government response

Financial Secretary to the Treasury, Mark Hoban, said the government was “committed to helping consumers get a good deal in these difficult times”.

He 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. “

OFT investigation

The government announcement follows an investigation by the Office of Fair Trading (OFT) which found that card surcharges, most commonly levied by travel companies, were often excessive and unjustified.

The OFT estimated that UK consumers spent £300 million on payment charges to airlines alone in 2009.

The OFT focused on the passenger transport sector where it found considerable evidence of companies using “drip pricing” practices for surcharges online.

Drip pricing is where payment charges are added to the total price only after consumers have navigated through a number of web pages during their purchase.

The OFT also ruled that card surcharges were misleading, particularly when avoiding them was only possible for a small proportion of consumers.

Super-complaint

The OFT investigation followed an official “super-complaint” by consumer organisation Which?.

Consumer organisations can make a super-complaint about any area of the UK goods and services market they believe significantly harms the interest of consumers.

Which? said the surcharges paid by consumers were in many cases significantly higher than the actual costs faced by retailers for processing card payments.

Next steps

The government will launch a consultation on implementing the ban at the beginning of 2012.

Consumer Minister, Edward Davey, said: "We want to make sure that consumers paying by card do not have to pay the excessively high surcharges being imposed on them by some airlines and other businesses.

“That is why we will consult on early implementation of the Consumer Rights Directive provision to protect consumers from excessively high credit and debit card charges."

“To take this forward, the Government will publish a consultation in the New Year setting out next steps.”




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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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