Taking steps to ban unfair credit card fees
I am pleased to report that the Government is taking steps to ban unfair hidden credit card fees. Some customers are being charged as much as much as £12 to use their cards when the actual transaction costs incurred by the companies is often less than a pound.
In some cases these charges can actually be higher than that of the product purchased. These charges are simply unacceptable given that, in essence, they are charging us for the pleasure of taking money out of our accounts.
Transaction charges are frequently hidden from the customer and often only revealed in the latter stages of payment. These costs significantly add to the cost of products and are certainly an unpleasant sight on those post-Christmas credit card bills.
The first part of the Government’s plans to tackle this problem is to increase transparency so that customers can be aware, right from the start, exactly what they will have to pay for the product or service.
Legislation is proposed to be brought in later this year, however, in the meantime I hope that companies act pre-emptively and start being up-front with their customers as to what exactly they are paying.
The second part of the Government’s plan is to cut these charges which will really benefit consumers. Airline passengers alone pay more than £265,000 a day in card surcharges. Cinemas, train ticket agencies and utility providers also levy transaction charges and with some companies, the charge for using a debit card has risen a staggering 15-fold since 2004.
According to regulators, the cost to a company on processing a debit card is about 20 pence. With credit cards it is generally one or two percent. It is reasonable to expect that businesses may need to add a small charge to cover the actual cost of processing a particular form of payment. However, above-cost charges should not be allowed and I am delighted that action is being taken on this.
Following recommendations from the Office of Fair Trading, the Government has decided to ban these surcharges on all forms of payment, including those imposed by airlines.
The UK is leading the rest of Europe on this issue as the EU is waiting until 2014 before banning these charges. After consulting on the detail, the ban will come into force before the end of this year and will benefit everyone using a credit or debit card in Crawley and country-wide.
Henry Smith - MP for Crawley
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Saturday 26 May 2012
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