Payment Surcharges Update

Customers paying for goods or services (usually online) will know that a retailer will often charge an additional fee where the customer has used a certain means of payment (for example a credit card). Customers are not always aware of these surcharges which can significantly increase the total cost.

New regulations which came into force on 6 April 2013 now prohibit a retailer from charging a consumer (by which I mean the general public rather than a business) an amount which exceeds the actual cost to the retailer for processing the means of payment. Retailers are still free to continue charging administration charges, booking fees and so on, provided that they do not relate to the method of payment used.

The regulations intend to prevent abuse by retailers through “drip pricing”, where a headline price is advertised and then further costs are levied on top, often once a consumer has invested time and effort in the purchasing process. By making it clear to the consumer the final price they will pay for goods and services, the regulations should also increase price transparency.

Retailers who currently charge above cost surcharges will need to adjust their charges for processing payments in order to comply with the regulations. If a retailer imposes a surcharge on a consumer which exceeds the retailer’s costs related to the particular payment method, the retailer will be liable to repay the excess back to the consumer. The regulations apply to most consumer contracts for goods and services and digital content.