Why are the Consumer Rights (Payment Surcharges) Regulations such a big deal for charities?
Charities often take payments for memberships and merchandise in order to raise funds. In common with many commercial businesses, they have often sought to pass on to the customer the additional fees they are being charged by banks and other intermediaries to use credit cards and debit cards.
However, some less scrupulous businesses have been charging excessive amounts and the Government, implementing new EU law, has moved to try to protect consumers by introducing, from January 2018, restrictions on payment surcharges.
What are the Payment Surcharges Regulations?
The Consumer Rights (Payment Surcharges) Regulations 2012, as amended by the Payment Services Regulations 2017 (the Regulations), impose controls on any trader seeking to charge a customer fees for the use of certain methods of payment, such as credit card, direct debit or online payment (e.g. BACS or by way of a third party provider such as Paypal).
When did the Regulations come into effect?
13 January 2018.
When Do the Regulations Apply?
The rules apply to transactions made in person, by phone or online.
Do the Regulations Apply to Charities?
The Regulations apply to “traders”, which, for the purposes of the Regulations, is a person or entity carrying out a trade, business, craft or profession. As no exemption is made for charities, they should assume the Regulations apply to them.
What do the Regulations Say?
Two key points:
- there is a ban on surcharges in business to consumer transactions which take place within the European Economic Area (the absolute ban).
- in business to business transactions, you cannot apply surcharges that exceed the cost borne by the trader of accepting the payment method (eg. Paypal’s commission charge) (the excessive surcharges ban).
Note, it is not the status of the buyer, but the method of payment that is relevant. For example, if a partner in a partnership uses a personal credit card but is buying for a business, the absolute ban applies. If they use a corporate credit card, only the excessive surcharges ban applies. However, differentiating between these situations will be hard in practice.
Also, if either the trader or the payment service provider is based outside the EEA, only the excessive surcharges ban applies.
What Does This Mean in Practice?
The absolute ban means that you cannot charge a consumer a fee for choosing to pay by:
- debit or credit card;
- online banking and telephone banking services (including Apple Pay and similar); or
- credit transfers and direct debits.
You cannot incentivise the customer to choose a particular payment method either if this effectively makes the other methods above more expensive.
Also, where you are allowed to levy surcharges that are not excessive, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require you to get the express consent of a consumer for that surcharge prior to contract formation.
What can you do if you are caught by the absolute ban?
- refuse to accept certain types of payment
- increase the cost of your product or service
- offer a discount for one-off payment over instalments, as long as the payments are made by the same method (so no effective surcharge is made)
- have a minimum spend (e.g. £5 or £10 for credit or debit cards)
- charge a booking or handling fee for all methods of payment (but being careful to be clear on pricing so as not to fall foul of other consumer protection legislation)
Consequences of Breaching the Rules
Where fees are charged in contravention of the Regulations, the customer is not obliged to pay it; and if it has already been paid, it is refundable.
 Where both the business and the consumer payment service provider is located in the EEA.