UK retailers must stop adding payment surcharges to covered consumer-card purchases from 13 January 2018. The ban also reaches non-card payment methods such as PayPal, according to HM Treasury. For the outright prohibition, both the shopper’s and retailer’s payment service providers must be in the European Economic Area (EEA). The change removes a payment-method fee at checkout; it does not make every payment free to process. [S1][S2]

Checkout settings need more than a single surcharge switch. New regulation 6A prohibits fees for non-commercial card-based payment instruments and qualifying non-card instruments. Commercial cards are excluded from that outright prohibition, but regulation 6A(2) caps a fee for using a payment instrument at the costs the payee bears for that instrument. For the retailer, a prohibited surcharge and a permitted cost-based fee need different treatment. [S2]

Provider location is another dividing line. Where only one of the two payment service providers is in the EEA, regulation 6B applies the cost cap but not the outright ban. The location of the shop alone is not enough to classify the transaction. The amendment also limits regulation 6A to contracts entered into after the Payment Services Regulations were made on 18 July 2017; the January start should not be read as rewriting every older contract. [S2]

Customers have a remedy as well as a clearer checkout price. Treasury says Trading Standards can take civil enforcement action and that customers are entitled to a refund of an unlawful surcharge, with legal action available to recover it if necessary. The statutory amendment extends the repayment provision to fees charged in breach of regulation 6A. For a retailer, switching off a prohibited fee for future purchases does not settle a customer’s claim about an unlawful fee already collected. [S1][S2]

What a merchant pays its payment provider is separate from what it may charge the customer for paying. Regulation 6A restricts the latter. It is not evidence that a shop’s processing bill has disappeared, or that customers will receive a matching reduction in the underlying price of goods. [S2]

Source documents

  1. HM Treasury: Card surcharge ban means no more nasty surprises for shoppershttps://www.gov.uk/government/news/card-surcharge-ban-means-no-more-nasty-surprises-for-shoppers
  2. The Payment Services Regulations 2017, as made: Schedule 8 paragraph 12https://www.legislation.gov.uk/uksi/2017/752/made