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EC proposals on credit and debit cards will be good news for consumers and retailers
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The European Commission has tabled proposals to give users of debit and credit cards – and of other payment services – a better deal. A new Payment Services Directive will give consumers a series of new rights while an accompanying Regulation will cap the fees retailers pay to banks to process debit and credit card payments. That should also reduce the costs to consumers.

    EC proposals on credit and debit cards will be good news for consumers and retailers

    Under the Payment Services Directive, airlines and others will no longer be able to demand additional payments from customers paying by the most commonly used cards, for example at the end of the online purchasing process.

    The proposal would reduce the maximum amount consumers might need to meet from their own pockets in the case of fraud or incorrect transactions to EUR 50 (£43) from EUR 150 (£129).

    Rights to unconditional refunds will also be strengthened and extended, notably to direct debit transactions.

    The new Directive will also increase protection for EU consumers purchasing goods and services from providers outside the EU: UK customers frequently for example buy on holiday and online from the US.

    Meanwhile a proposal for an EU regulation on "interchange fees" paid by retailers to banks for processing card transactions will put an end to excessive and untransparent charges ultimately borne by consumers.

    The caps will be set at 0.2% of transaction value for debit cards and 0.3% for credit cards. They should lead over time to lower prices in the shops.

    In the UK the Commission estimates interchange fees on debit cards should fall by around 20% from current average levels. Credit card fees will in many cases fall by considerably more.

    Currently these fees are untransparent and competition regulators have found them to be excessive and to stifle competition.

    In addition, the structure of fees can lead to debit card users unwittingly subsiding benefits such as air miles offered to premium credit card customers.

    The Commission does not believe the proposed changes will necessarily lead banks to charge – or charge more - for issuing cards. Some card providers have already committed to capping interchange fees at similar levels as a result of competition cases brought by the Commission, based on those levels reflecting the true cost of providing the services concerned, with the schemes remaining viable.

    And if some banks do increase fees, those increases – unlike the current charging system – will be transparent, allowing customers to look for cheaper solutions.

    In the US, banks initially announced increases of cardholder fees after interchange fees regulation was put in place but had to withdraw the announcements after negative consumer reactions.

    The Commission's proposals will also facilitate the entry into the market of new online payment providers using other models than credit and debit cards, such as sites allowing direct payments from customers' online banking facilities. This wider competition – and further innovation encouraged by today's proposals - should also put downward pressure on costs.

    For the proposals to become EU law, both the European Parliament and national Ministers meeting in the EU Council need to debate, possibly amend and approve them. Under the voting system in the Council, weighted by population, a qualified – in other words large - majority of the Member States' weighted votes is required.

    The Commission believes that this process should be treated with urgency, given the importance of today's proposals for consumers. 

    Quotes

    Internal Market and Services Commissioner Michel Barnier said: "Today, the payment market in the EU is fragmented and expensive with a cost of more than 1% of EU GDP or €130 billion a year. These are costs our economy cannot afford. Our proposal will promote the digital single market by making internet payments cheaper and safer, both for retailers and consumers.  And the proposed changes to interchange fees will remove an important barrier between national payment markets and finally put an end to the unjustified high level of these fees."

    Vice President Joaquín Almunia added: "The interchange fees paid by retailers end up on consumers' bills. Not only are consumers generally unaware of this, they are even encouraged through reward systems to use the cards that provide their banks with the highest revenues. Complementing the enforcement of antitrust rules, the regulation capping interchange fees will prevent excessive levels of these fees across the board. A level playing field will be created for payment services providers, new players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices."

    Full details, including an FAQ Memo and the full text of the proposals, can be found here (under heading "Payments legislative package – 24-07-2013")

     

    For more examples or to arrange interviews, please contact the London press office on 020 7973 1971.
    Please note: all amounts expressed in sterling are for information purposes only.

    Last update: 05/08/2013  |Top