OFT To Stop Misleading Debit Card Surcharges By Travel Companies

The OFT is making moves to get travel companies to stop their misleading credit and debit card surcharges.

Following a super-complaint from Which? and its own investigation, the OFT has put travel companies on notice to change their misleading debit and credit surcharging practices. If they don’t respond they face enforcement action under consumer protection laws.

The OFT also calls for the law to be updated to stop consumers being surcharged when buying goods and services with any debit card.

Their investigation 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.

When making a surcharge comes as a surprise or when it is effectively compulsory as free payment mechanisms are not available for the majority of consumers, the OFT considers the practice misleading.

A debit card for payment is effectively the online equivalent of paying in cash and to make headline prices truly meaningful and comparable traders need to stop charging for paying with any debit card – the online equivalent to cash.

Surcharges can be made 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.

For the longer term the Government is being asked 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.”

and added ‘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.’

MoneyHighStreet says: “This is great news for consumers, the sooner the unreasonable practices of debit card surcharges are stopped the better.

In the meantime, a way round these surcharges, as applied by such as Ryanair, is to use a prepaid card – such as a Kalixa card or CaxtonFX card.’