Linda McAvan: Change on the cards over high price of paying

In recent years, as more and more people have begun using the internet to pay for goods and services, especially to book travel tickets, businesses have responded by charging their customers fees to pay by card. Now there is some good news for consumers.

Members of the European Parliament and Ministers from the 27 EU member states have just agreed a new EU law, the Consumer Rights Directive, which will make all rip-off surcharges, for both credit and debit cards, illegal by 2014.

The EU law comes in the wake of thousands of complaints from consumers across Europe in recent years.

Credit and debit card fees have become increasingly exorbitant, with one well-known airline now charging a transaction fee for each passenger’s ticket, meaning someone purchasing four return tickets would have to pay the card surcharge eight times, a cost of £40 simply to pay.

There are countless other examples such as the website that charges a blanket £3.50 credit card fee to purchase train tickets, even if the train ticket is cheaper, while some music festival goers are being charged a transaction fee of £5.25 on top of a separate booking fee.

What makes these fees so frustrating to so many consumers is that there is rarely any other option but to pay with a credit or debit card, making the charges all but inescapable.

Worse still, it is often only on the final click of the mouse that the extra amount becomes apparent – leaving customers with little option but to go ahead and make the payment.

The lack of transparency over the amount of money people will actually have to part with also makes it difficult for consumers to compare rival retailers’ prices.

This practice, estimated last year to cost UK consumers around £300m in card surcharges to the airline industry alone, prompted Which? – the UK consumers rights body – to undertake its own investigation.

Which? puts the actual cost of a debit card transaction to a retailer at as little as 10p or 20p while credit card fees should cost no more than two per cent to process. It concluded that not only are the public being overcharged, but the fees are affecting competition.

It therefore presented its findings to the Office of Fair Trading (OFT) in the form of a super complaint. The complaint made a number of demands: that the charges are made clear from the outset; the cost of processing card fees should be no more than the cost to the retailer; and that retailers should, ideally, absorb the cost themselves.

Last week, the OFT responded to the super complaint by broadly agreeing with the demands of Which?. It recommended that the coalition Government should act to prohibit surcharges for payment by debit cards and force retailers to make any fees for paying by credit card absolutely clear from the beginning of the payment process.

In the light of these findings, Labour MEPs are pressing the Government to move before the 2014 deadline set by the EU and implement legislation that will outlaw unfair surcharges immediately.

This is not the first time the European Parliament has successfully fought for the rights of consumers across the continent. Rules agreed by MEPs led to airlines having to pay compensation to people bumped off flights that were overbooked while those faced with long delays were also entitled to recompense.

Another victory for consumers was the capping of mobile roaming charges which had caught many a holidaymaker out as they were charged unreasonable prices for using their phone abroad, even just to receive calls.

Last Friday saw the maximum fee for sending text messages and making calls abroad reduced again, while there are plans for further cuts in charges for sending emails and downloading data when roaming.

With household budgets becoming tighter due to the economic downturn, consumers can ill afford unwarranted credit and debit card fees. This new European legislation, combined with the OFT’s judgment, has put retailers, who have overcharged consumers for years with card fees, on warning that this surcharge bounty will soon be over.

The Government must now act to end this unfair practice sooner rather than later. Consumers in this country and across Europe stand to gain as prices become more transparent and costs fall.

* Linda McAvan is Labour MEP for Yorkshire and the Humber.