Payments News

Comment: Who pays to pay? The ban on surcharging

Aug 07, 2017
Christopher Ratcliffe from Taylor Wessing, examines the ban on retail payment surcharging.

In July 2017, the Government passed legislation to ban all retail payment surcharging as part of its implementation of the Second Payment Services Directive (PSD2), which will come into force on 13th January next year.

This marks a significant departure from existing law and incoming PSD2 requirements.  Currently, retailers are allowed to charge customers for particular payment methods provided they only pass on the direct costs borne by them. Under PSD2 (the European Directive that will regulate the provision of payment services from 2018), it was thought that retailers would continue to be allowed to charge customers for the costs of accepting payments, provided those costs did not relate to payment cards whose fees are regulated via Interchange Fee Regulation. This carve out was in itself significant – all four party card schemes such as Visa and MasterCard are regulated by the Interchange Fee Regulation – but as the fees passed on by card issuers were strictly controlled, there was limited benefit in allowing surcharging in these cases. Nonetheless, the Government's shift to an absolute prohibition across all retail payments is surprising given the spectrum of costs incurred by merchants for accepting non-Visa/MasterCard payments.

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