Source: HM Treasury
These new rules, which are part of the Interchange Fee Regulation that the European Union (EU) agreed earlier this year, introduce an EU-wide cap on the charges paid by a business when a customer pays for something using a card.
From 9 December 2015 the fees banks can charge will be capped at 0.30% and 0.20% for credit and debit card transactions respectively.
View the consultation.
Making sure that the EU has a competitive financial services industry that works in the interests of consumers and supports the wider economy is a key pillar of the UK’s reform agenda, and tackling unfair card fees was a key recommendation of the Prime Minister’s EU Business Taskforce.
The agreement secured on the Interchange Fee Regulation demonstrates how Europe can ensure that business and consumers alike benefit from the single market.
There were almost 10.7 billion credit and debit transactions in Britain in 2013, and the British Retail Consortium has estimated that the agreement could save British businesses up to £480 million a year.
The government would like to see this benefit passed on to consumers in the form of lower prices.
Separately, the EU is also close to finalising a revision of the Payment Services Directive (PSDII), to prevent businesses from making money from customers who choose to pay by card by capping or banning the practice completely (depending on the type of card).
Chancellor of the Exchequer, George Osborne said:
Ensuring the EU has a competitive financial services industry that works in the interests of consumers and supports the wider economy is a key pillar of our reform agenda.
That’s why we are determined to tackle the unfair fees that Britain’s businesses are often charged when their customers pay by card - fees which are often passed on to consumers.
And that’s why I am delighted that we reached an EU agreement to reduce the fees that banks can charge businesses for processing card transactions. I expect businesses to pass on these savings to consumers in the form of lower prices.
The Interchange Fee Regulation allows national governments to set caps below 0.30% and 0.20% for domestic credit and debit card transactions. In the consultation launched today (27 July 2015), the government proposes implementing a 0.30% cap on domestic credit card fees, and an average 0.20% cap on domestic debit card transactions.
Contributed | what does this mean?