Should the government prohibit Credit Card surcharges?

Brendan Burgess

Brendan Burgess

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I think Askaboutmoney could have a very interesting debate on this which I might formulate into a formal submission.

Minister Martin seek views on proposal to prohibit ‘credit card payment surcharges’

Micheal Martin T.D., Minister for Enterprise, Trade and Employment wishes to announce a public consultation prior to the commencement of Sections 48 and 49 of the Consumer Protection Act 2007.
In accordance with the provision of Sections 48 and 49 the Minister is seeking the prohibition of ‘credit card and other relevant methods of payment surcharges’ to consumers.
Section 48 of the Act prohibits traders who accept payment for goods and services by a number of different relevant payment methods from imposing additional charges on the price of goods and services solely by reason of customers choosing to make payment by one relevant payment method over another.
Section 49 obliges traders who do impose additional charges solely by reason of customers paying for goods and services by a particular relevant method (and who by virtue of only accepting payment by that one relevant method are not subject to the prohibitions of Section 48) to ensure that such charges are included in the price of such goods and services, which must be represented as a single amount.
Before commencing Sections 48 and 49 later this year, the Minister is seeking the views of the public, payment card holders, retailers and other interested parties on a number of issues.
For example the Minister is seeking views as to what additional methods of payment, other than the methods of cash, credit cards and direct debit already specified in Section 48, should be prescribed as relevant payment methods for the purposes of the legislation.
The Minister is also anxious to identify any issues which would require guidance arising from the commencement of Sections 48 and 49.
“The consultation paper detailing the various issues upon which I am inviting views is available on the Department of Enterprise, Trade and Employment website at http://www.entemp.ie/publications/commerce/2007/consultationpaper48&49Aug07.pdf or can be applied for by telephone at (01) 6312617. I have also arranged for advertisements to be placed tomorrow’s national media. I am interested in hearing the views of all interested parties and I would urge them to submit these by the 7th September deadline,” the Minister said.
“The sole aim introducing these provisions is to protect consumers and I am confident that their impact will be in line with that aim,” the Minister concluded
Comments on the consultation paper should be submitted by electronic format to conspol@entemp.ie, or by post to Consumer Protection Act Consultation, Competition and Consumer Policy Section, Department of Enterprise, Trade and Employment, Earlsfort Centre, Lr. Hatch Street, Dublin2 by Friday 7th September.
 
Re: Public consultation on credit card surcharges

As they said on Newstalk this morning, if the Government want to save people money ('protect consumers'), why not abolish the stamp duty on credit cards which affects all credit card holders?
 
Re: Public consultation on credit card surcharges

I agree with CCOVICH; why not remove the duty on cards?
As for the surcharge; it makes sense as the merchant will have to recover the cost somewhere. When the cost is presented in an open book format the consumer has the choice to accept it or use a different payment method. If the merchant cannot present the cost in this way it will be averaged out into their cost base and applied to all prices. This lack of transparency is not in the interest of the consumer.
I suspect that the credit card companies support the idea of banning surcharges.
 
Re: Public consultation on credit card surcharges

Is this consultation also relevant to proposed plans to ban levies on those who fail/refuse to pay by card or direct debit in certain situations (e.g. like the way NTL recently penalised non DD bill payers by charging them an extra €2.50 or something like that a month)? Seemingly there is a proposal to ban such charges but this would also have the possibly undesirable side effect of making it illegal to offer discounts to people who do choose to pay by card/DD. I'm not sure of the exact details (e.g. who is proposing the legislation, what state it's at and whether or not it relates to the original post here).
 
Re: Public consultation on credit card surcharges

The consultation is about credit card surcharges, so this discussion should be about them.

The tax on Credit Cards is relevant, but please don't take the thread off into other areas.

Brendan
 
Re: Public consultation on credit card surcharges

Prices quoted by Ryanair, Ticketmaster etc. should be all inclusive, i.e. if there are handling fees etc. that cannot be avoided (other than by choosing not to purchase the product/service from the provider in question) they should be included.

In fact, if it can be 'proved' that the majority of certain purchases take place by using a credit card, would it make sense to have the regular price include a cc charge, with a line stating that there is a 'discount for cash purchases'.

As far as I can see, cc surcharges/handling fees etc. are a standard cost of doing business in some cases, e.g. most online bookings, so if they are banned, prices will simply rise.

No real benefit to the consumer there as far as I can see.
 
Re: Public consultation on credit card surcharges

Brendan

Good thread. The surcharge is probably excused as an effort to cover costs of administration (which have been driven down by end to end processing) and the merchants charge on turnover which can be as high as 4%. Though I'd imagine that RyanAir et al have negotiated this down or generates quite a lot of fee income on profit share deal. I suspect the latter.

Frankly today, unless the zipzap machine is still in use there is no reason why surcharges should apply. They are a hangover of a time where it might have been legimate but have become another way of generating fee or additional income.

Its an exploitative tax on electronic consumer transactions. As far as the Government tax which is in fact a transaction based charge inherited from the bill of exchange stamp , it's a nonsense in a modern society promoting access to IT solutions.

It would be interesting to factor in the costs of development of these payment systems and reckon the ROI at this time. Intuitively there are super normal profits being made per transaction.

From a consumer perspective I expect to pay for conveniece but it is quite apparent that this payment has an embedded markup.

In a wider sense the regulatory captivity or self-interest of relationships between the banking intermediaries and credit card payment system providers is quite unique in the Irish case.

Suggest a "non-tranferable to the consumer" "tax" per transaction on the banks and others might well act as an impetus to competition. This is a case of Government and industry collusion in a system that requires the consumer to pay more than what might be seen as a reasonable price for conveniece. After all I am now no longer charged through the nose for making a mobile call...unless I roam.

The cost per credit card transaction has plummeted in the past decade and surcharges are a throw back. The relevent section should be enacted which leaves the matter of expensive cash and cheque payments to be dealt with another way.

I also note the minister for reports has struck again.
 
Re: Public consultation on credit card surcharges

Riddler said:
I also note the minister for reports has struck again.
Click to expand...
How true, they are still reading the ones from the Martin era in the Dept of Health.
Great post BTW.
 
Re: Public consultation on credit card surcharges

I have a Head to Head with Dermot Jewell of the Consumers' Association in today's Irish Times



Brendan
 

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Re: Public consultation on credit card surcharges

I found Dermot Jewell's article very poor. I lean towards the views expresssed by Brendan, with a small caveat: There is an issue with some vendors using the credit card surcharge as a way to generate revenue, rather than merely cover costs. This can penalise the consumer who fails to shop around or use alternative payment methods. Often, the consumer who fails to shop around is the poorly informed one who perhaps needs protection. Admittedly it is also often the consumer who is just lazy, and deserves no sympathy
Can we find a way to protect the ill informed? Can we regulate so that charges cover costs and go no further? Is this going to be more than it is worth for the benefits delivered?
 
Re: Public consultation on credit card surcharges

They should have renamed the slot Header to Header for this week only.
 
Re: Public consultation on credit card surcharges

A load of populist nonsense from Dermot Jewell. I expected better.
 
Re: Public consultation on credit card surcharges

Poor stuff alright. He seemed to pin all "blame" on the retailers/banks/CC companies and ignored the fact that consumers have some responsibilities in such matters - e.g. to pay off their CC bills or pay interest on outstanding balances (he seemed to consider those who did/could not as some poor unfortunates rather than people who had landed themselves in debt through their own volition) and to shop around when choosing a product/service and a payment method that matches their specific requirements.
 
Re: Public consultation on credit card surcharges

Are we missing something here. The CC market is oligopolistic with on the face of it little or nor real competition. Given the merchant providers who are also card issuers are owned by the Banks then we are dealing with a situation where the retailer and consumer are in effect captured by the power of the service providers. The argument would appear to be if there is proper competition and transparency then the consumer should beware….which appears to be a version of caveat emptor. Or that the consumer should have to foot the pass through pricing of an oligopoly. I doubt if many businesses would like to move back to the cash economy. Convenience comes at a price but at what is the true cost ? Remember that small businesses are consumers of card services too with little or no power as buyers.
 
Re: Public consultation on credit card surcharges

Is the credit card surcharge any different to a bank saying that cash handling charges are massive so they are going to charge a surcharge for every cash lodgement and withdrawal?

Also the example of James Adams charging 2% for visa and 3.5% for mastercard due to different charges imposed on them by the companies. Fair enough, but I have never seen a retailer or business display a list of charges imposed on them by the credit card companies. How do customers know that James Adams is not being charged 1.5% and 3% and the extra .5% is profit. There doesn't seem to be any transparency. For example if Visa charge 2% to retailers, then why did Ryanair just charge me a 7.47% surcharge for booking a flight using a visa card.
 
Re: Public consultation on credit card surcharges

The consultation is about credit card surcharges, so this discussion should be about them.

The tax on Credit Cards is relevant, but please don't take the thread off into other areas.
Click to expand...
Thanks for highlighting this proposal.

I will be submitting a comment about the tax on credit cards, which is effectively a tax on ecommerce. IMHO, this is a far more important issue.

Section 48 of the Act prohibits traders who accept payment for goods and services by a number of different relevant payment methods from imposing additional charges on the price of goods and services solely by reason of customers choosing to make payment by one relevant payment method over another.
Click to expand...
I suspect that companies will simply always charge the higher amount.
Example, credit card processing company charges €1 for a laser card and €5 for a visa card. The retailer will just charge €5 for every transaction.
 
Re: Public consultation on credit card surcharges

I think Brendan's Irish Times piece was deficient in many respects, and although Jewell was sloppy, Brendan was sloppier. Many of the things Brendan said don't stand up to scrutiny, for example:

"If I pay by credit card, the business has to pay the credit card company 3 per cent of the purchase price. If I buy something from an impoverished artist for €400 with my credit card, the artist gets €388 and the credit card company gets €12"

Not true. The retailer pays its 'acquirer' (its bank) the fee, it doesn't pay the CC company. Also, the fee is not 3%. It varies. It can be zero, it can be 1%, it can be 5%. It all depends on the retailers relationship with its acquirer and the deal it has negotiated. The problem is that current rules allow for a lack of transparency. Retailer says "the charge is to cover the fee I'm charged". Customer has no way of knowing this - the retailer can easily slide in an extra margin on the surcharge, effectively charging (in an unregulated fashion) a margin on the sale of a financial product.

"If surcharges on credit card payments are banned, many businesses will simply stop accepting credit card payments. How can this be in the interests of consumers?"

Of they course they won't stop. If businesses want to be competitive, they will accept CCs. Simple as that. It is a cost of doing business. They gain advantage from it (it widens their market and appeal). They benefit, therefore it's a cost they should absorb.

"The best protection for consumers is competition, choice"

Yes, but on a level playing field. If a consumer is penalised for one method of payment over another, is that real choice?
 
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