Understanding the card payment surcharge ban

14th Feb 2018

Businesses are now banned from the common practice of adding surcharges to customers who wish to pay by card. 

The change came about because there was a considerable level of dissatisfaction from consumers who felt that card surcharges were unfair “hidden” costs that only became apparent after they are committed to a purchase. The UK also now complies with the Second EU Payment Services Directive (PSD2).  

Businesses were previously simply recharging the fees that they themselves were charged for allowing their customers to pay by card.

The ban covers a range of payment methods, including debit cards, direct debits, online/telephone banking transfers and similar arrangements such as PayPal. Essentially, cash and cheques are the only common consumer payment methods that are not affected by the new ban.

Does the ban affect commercial purchasing?

It will still be permissible to surcharge transactions that involve commercial payment methods but this relates to the METHOD of payment and not the NATURE of the transaction. If an individual makes a purchase with a credit card, the fact that this may be a genuine business expense will be irrelevant; the surcharge ban will apply if they use a personal card, but will not if they use a business card.

Furthermore, the surcharge ban does not outlaw any form of surcharge; only one imposed for the use of a particular payment method. Accordingly, an administrative/booking fee which is payable by all customers regardless of the means of payment will be unaffected.

However you will need to take care with adding a blanket fee for purchases. For example, it is unlikely that cash or cheques will be used for online transactions so an ‘online transaction fee’ could be seen as a payment surcharge, given that the unaffected payment methods can’t be used here and no other expense could justify the fee.

Businesses also need to bear in mind that the increasing number of overlapping requirements in this area, including the wider restrictions on “unfair trading”, may soon mean that the inherent risks involved in any form of surcharging arrangement will outweigh the commercial benefit involved.

For advice, assistance or for more information on costs, please telephone our office on 01202 512227.