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76/11 28 June 2011
The OFT has put passenger travel companies on notice to change misleading debit and credit card surcharging practices or face enforcement action under consumer protection laws.
Publishing its findings on these surcharges, following a super-complaint from Which?, the OFT also calls for the law to be updated to stop consumers being surcharged when buying goods and services with any debit card.
A 90 day OFT investigation into the issue, which focused on the passenger transport sector, found considerable evidence of companies using 'drip pricing' practices for surcharges online - adding payment charges to the total price only after consumers have filled in a number of web pages during their purchase. This practice is particularly prevalent in the airline sector - where the OFT estimates UK consumers spent £300 million on payment surcharges during 2009.
The OFT considers that surcharging for using a credit or debit card is potentially misleading to consumers when it comes as a surprise - particularly when free payment mechanisms are only available to a small proportion of consumers, making a surcharge effectively compulsory.
To make headline prices truly meaningful and comparable, the OFT is calling for traders to stop charging for paying with any debit card - the online equivalent to cash. Traders should still be able to impose surcharges for other payment mechanisms such as credit cards, which can be more costly to process, provided that they meet the minimum transparency requirements set out by the OFT in today's report.
The OFT is currently discussing surcharging practices with a number of passenger travel companies to secure compliance with Consumer Protection Regulations and will take enforcement action as necessary.
To provide certainty for consumers and businesses in the longer term, the OFT is asking the Government to change the law to prohibit surcharging for all debit cards.
Cavendish Elithorn, Senior Director of the OFT's Goods and Consumer Group, said:
'The growth of internet retailing has brought massive benefits, but the increasing use of card surcharges is not one of them. You can't buy online with cash and people are frustrated about being asked to pay for paying.
'Consumers find it harder to shop around and find the best deal if they have to invest time and effort in discovering surcharges. This also weakens competition between retailers which is bad news for the UK economy.
'We recognise that most traders want to treat their customers fairly. Many already meet the minimum standards we expect under the law and we have secured a clear commitment to change from others. However, we will take enforcement action against any businesses that do not respond to today's announcement and instead continue to use misleading surcharging practices.
'We believe there is also a strong case for a change in the law so that the cost of using a debit card, the almost universal payment method for today's online consumers, is always included within the headline price.'
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