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NatWest bank brands fined for overcharging interchange fees

NatWest bank brands fined for overcharging interchange fees

Four banks in the NatWest stable - National Westminster Bank, Royal Bank of Scotland, Ulster Bank and Coutts & Company - have been hit with a £1.82 million fine for overcharging interchange fees on credit cards.

The Payment Systems Regulator (PSR) opened an investigation into the banks four years ago after the issue was picked up during routine monitoring.

It found that the banks incorrectly treated a number of cards as being ‘commercial’ cards when they should have been treated as ‘consumer’ cards. This meant that fees charged by these banks weren’t capped and were set at too high a level.

As a result, both acquirers and, ultimately, merchants were overcharged. The PSR found that the banks wrongly profited from almost £1.2m in excess interchange fees between March 2016-18.

Chris Hemsley, managing director of the PSR, comments: “The interchange fee caps were put in place to reduce the cost of accepting customer card payments for shops and other merchants’ businesses. The banks broke the rules by failing to bring themselves in line with the caps.

"Not only have the banks reimbursed the fees to acquirers which they were not entitled to collect, but we have also fined them for their failings."

Comments: (1)

Bob Lyddon
Bob Lyddon - Lyddon Consulting Services - Thames Ditton 20 May, 2022, 12:07Be the first to give this comment the thumbs up 0 likes

This strikes me as a considerable piece of disinformation, and a much less impressive result than the PSR would like us to believe.

The Decision Notice states neither the total monetary amount of the purchases from merchants made on these cards to which the over-deduction of Interchange Fees relates, nor the over-deduction, nor the original, total deduction.

Only the over-deduction will have been reimbursed to the merchants, leaving the larger, residual deduction unreimbursed. A complete view would furnish the relationship of the over-deduction with both the residual deduction and the total monetary amount.

As it was the intention of the Interchange Fee Regulation that the Interchange Fee be the only deduction experienced by merchants, we will then be able to appreciate the extent of the failure of the PSR and the other UK authorities to properly interpret and implement the Regulation, and allow the payment cards ecosystem to continue to trouser between 3-8% of face value on a fast-rising proportion of UK payments.

A fine of £1.8 million is peanuts compared to that, which points to the over-deduction being peanuts as well, and the total monetary amount being a drop-in-the-ocean of the amount paid by cards every day and subjected to fat deductions.

We would also like to see a statement of the PSR’s costs for this case, and see if their costs were higher than the fine and the reimbursed over-deduction.