Financial and Business|

OFT Orders Debit Card Charges Ban

Office of Fair Trading (OFT) Logo & Credit Card MachineCompanies across the travel sector and beyond have been hitting consumers with hidden charges and excessive fees, and the Office of Fair Trading (OFT) is out to right this wrong. They are particularly out to ban debit card charges imposed by travel firms, as well as to force fees for credit card transactions to be at least known to consumers before they begin booking.

After investigating the issue of card charges, which was spurred from a super-complaint by consumer body Which?, the OFT found considerable evidence that companies have been drip-pricing. This is practice where surcharges are added to the total cost of a transaction after consumers have clicked through several web pages and entered their information. They find this practice misleading, but some airlines like Ryanair say that all fees can be avoided and that the investigation won’t change how they do business.

The OFT didn’t give names of the travel firms that are worst with these transaction charges, but the regulator pointed out that it costs £8 per card transaction to book with easyJet, but consumers are only told this after going through 8 web pages. With Ryanair, customers are told the charge is £6 after 4 pages. The regulator estimates that consumers in the UK spent £300 million on payment fees in 2009. Because of this, the OFT is requesting that the government change the law so all debit card fees are banned. It noted that, although some companies have bluntly refused to scrap the charges, a number of airline, rail and ferry firms have agreed.

Monarch Airlines is said to be one of those companies, with a spokesman saying that there’s no justification for excessive fees to be charged on debit and credit cards. The carrier decided some time ago that it would cancel debit card fees after an intensive 6-month review. Customers expect a transparent and upfront pricing structure from the airline, he added, and it’s good to see that other airlines will now be forced to follow the lead.

In the regulator’s 90-day review, it points out that the consumer doesn’t have any other option but to use a debit or credit card in several cases. Customers are effectively being forced to pay for paying for their booking. If the situation doesn’t change, it will consider taking legal action.

The OFT didn’t explore charges being imposed on credit card transactions due to the complex, mulit-layered pricing structure. However, it did note that businesses should still be able to charge some for credit card transactions since this can be more costly, but they have to meet the minimum transparency requirements. Additionally, the Consumer Rights Directive, which is going through European Parliament now, will require governments to make sure that only the bare minimum fee is imposed on this form of payment – if the proposal passes.

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