20/07/2017

Consumers will no longer have to pay up to 20% extra for making purchases by debit or credit card after 13 January next year when the Payment Services Regulations 2017 come into force to consign rip-off card charges to history.

Developed to transpose a provision in the revised EU Payment Services Directive (PDSII) banning surcharges on Visa and Mastercard payments, the regulations have been ‘gold-plated’ by the government to extend the ban to American Express and Pay Pal.

Surcharges by local councils and government agencies will also be outlawed. This means, for example, the DVLA will lose £8.3m it currently gains from the £2.50 flat payment added to vehicle tax payments made by credit card, while HMRC will no longer be able to add up to 2.406% to tax bills paid by card.

Airlines, which can add a thumping 20% to the cost of a flight, food delivery apps and small businesses that typically add a fee for card payments are among the worst offenders in a widespread practice that HM Treasury estimates cost the public £473m in 2010 alone.

Even if – as some commentators believe likely – the ban results in many retailers simply boosting prices of goods to compensate for the loss of the card surcharge, it will at least improve price transparency.

While it introduces the ban on card surcharges, PDSII is also concerned with establishing a common payment services regime across the entire European Economic Area, taking full account of the developments that have dramatically changed the market.

Its major innovation is a regulatory framework for two new types of ‘3rd party’ payment service providers. Rather than providing or servicing payment accounts, the so-called Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) are designed to optimise the way customers manage their existing online payment accounts and make better comparisons of deals.

‘Implementation of the revised EU Payment Services Directive (PSDII)’ links to responses to the March consultation on PDSII (see our reference, ‘A Common European Payment Services Regime for the Digital Age’ – 10 February) and also to the regulation (and explanatory memo) that will introduce the card surcharge ban.