Banks will have to limit the fees they charge on card payments under proposals from the European Commission today that would also scrap surcharges on shoppers for paying with plastic.
The draft law would squeeze an important source of income for banks but should bring lower prices for consumers. It will also end the practice of bumping up the cost of airline tickets, for example, when consumers use their credit card to pay.
“The interchange fees paid by retailers end up on consumers’ bills,” said Joaquin Almunia, the European Union commissioner in charge of antitrust enforcement, who announced the measures.
“Retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices,” he said.
The commission estimates that the new curbs could save retailers €6 billion. The rules will in particular affect Visa Europe, the European licensee of Visa Inc. that is owned and operated by roughly 3,000 European banks including all major lenders.
MasterCard will also be affected. Some cards, however, such as branded commercial cards issued, for example, by a retailer will not be covered. American Express, which operates on a different basis, will also be largely unaffected.
In response to the EU plans, Visa and Mastercard disputed that the new law would benefit consumers. The UK Cards Association, which represents card issuers in Britain, said they might be forced to introduce new fees to cover their operating costs.
At the moment, banks charge a fee when processing payments using cards that can amount to 1.5 per cent of the purchase price.
Under the draft rules, which the commission hopes will widen retailers’ acceptance of cards, that charge would be capped at 0.2 per cent for debit cards and 0.3 per cent on credit cards.
Once the European Parliament and EU countries give their blessing for the rules to come into force, companies such as airlines would be unable to impose surcharges, saving consumers €730 million annually.
If MEPs in Brussels hammer out final details of the rules before European Parliament elections next year, the law could be in place in 2015.
