Draft Interchange Fee (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Tuesday 22nd January 2019 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to join you here in Committee again, Mr Hanson. I echo a lot of the concerns that the hon. Member for Stalybridge and Hyde expressed about the scheme.

It seems to me that, as with all things to do with Brexit, we are moving backwards. The EU and the EU Commission have moved over many years to reduce fees to make transactions simpler. What we are doing here, particularly with the statutory instrument and the prospect of a no-deal Brexit in the offing, is going backwards—reducing the benefits that our citizens have, and their ability to carry out transactions, to work, travel and live across different countries and to carry out their business.

I seek a couple of points of clarification. My understanding is that the explanatory information differentiates between credit cards and debit cards, but that differentiation is not within the SI itself, which mentions only credit card transactions—

“0.3% of the value of the transaction for any UK credit card transaction.”

In the explanatory information, debit cards are differentiated from credit cards. I would like to understand from the Minister why that is the case. Obviously, it would be to the detriment of debit card users were they to pay that higher fee because they are not recognised in the legislation.

A briefing that I found on the legal firm Bird & Bird’s website mentions that higher interchange fees could be passed on to consumers, “either directly or indirectly”, as it says in the explanatory memorandum. Bird & Bird says that “indirectly” is perhaps

“a reference to the fact that UK merchants may increase their retail prices in order to recoup the increase in interchange fees.”

Baroness Bowles mentioned in the Lords that before the EU interchange fee was introduced in 2015, the cost passed on to goods across the EU was €9 billion in 2011 alone. I would like to know from the Minister the estimated cost of the fee to ordinary people buying things in shops, because he has not provided explanatory information on the basis that it does not make the £5 million threshold. That might be a cost to business, but what is the cost to consumers? It is unclear from what the Government have provided what the cost will be to consumers of increased interchange fees.

Bird & Bird goes on to say:

“The reference to ‘directly’ would seem to be a reference to surcharging. However it is not clear to us how this would be possible since the Consumer Rights (Payment Surcharges) Regulations 2012 prohibit merchants from surcharging consumer cards altogether (whether in relation to transactions that are subject to interchange fees caps, or not).”

I would be curious to hear from the Minister what “directly” refers to, because it does not seem to me that it is something that is permitted—certainly it is not as far as Bird & Bird is concerned.

Bird & Bird also noted the reference in paragraph (2) of regulation 11, “Final provisions”, to article 16 on universal cards. Bird & Bird says that

“it is proposed to keep the article on ‘universal cards’ under the UK regime—however this article is not relevant to the UK. It is relevant to a situation where consumer credit cards and consumer debit cards are ‘not distinguishable’”.

They definitely are within the UK. Bird & Bird goes on to say that that is

“applied exclusively (or at least primarily) in France.”

Bird & Bird is therefore not quite clear why that is being passed through. I appreciate that the Minister said that the instrument was not about making changes but about transposing things. However, it is transposing something that is not actually relevant. May we have further clarification on that?

May we also have a bit of clarity on how the matter will be monitored in future? The provision is for the event of no deal. We hope very much that that will not be the case, but if it is, the increase in UK-EEA cross-border transaction fees would be set by Treasury regulation. Will the Minister give more clarity on how that oversight of Treasury regulation would be carried out? Is this matter just for the Treasury to go off and decide? When we find that consumers are suddenly being charged more, how do we then question and monitor that in the years ahead? What is the Government’s plan for this area?

It just seems to me that this measure is giving too much power to commercial companies. The Government say that this matter will be a commercial decision for companies, but that will almost certainly be—because these things almost always end up being—to the detriment of our constituents. I would like to see a bit more pressure on the Government to keep a bit more control over these interchange fees, rather than letting the market decide, because as I said and as was pointed out before in the Lords, the market deciding ended up with customers losing out quite a lot.

We can all remember—it was not very long ago, indeed—that if we travelled and tried to make transactions, we would always get a fee on our bills. That fee has been reduced and the situation has improved over time. So I do not see why the Government should allow companies to decide this matter, when it has been EU regulations over the piece that have managed to drive down these fees, to the benefit of all of us in this country.

Finally, I just ask the Minister to rule out no deal, because we do not want to get to no deal. We do not want this piece of legislation that we have been poring over actually to end up being used, because that would be a disaster for all of us, right across these islands, and I hope very much that we do not get to a no-deal situation. It would be useful to hear more from the Minister on that issue.

--- Later in debate ---

[John Glen]

We have to remember that this is in a no-deal situation; we would be outside and without the scope of the EU regulations of which we are currently a part. We would have no regulations for maintaining the caps within the UK. All we are doing is domesticising that existing provision as far as we can, within a UK environment. In our engagement with industry and with the PSR, it has been recognised that this is necessary but it is not the final solution. That is why there would need to be further innovation and policy work subsequently, as I have set out.

In conclusion, the SI is needed to ensure that the UK continues to have a functioning legislative and regulatory regime for payment card interchange fees in the event of a no-deal scenario. I have reiterated my belief that that should not be the outcome we secure in the end, but I hope I have dealt with the points raised. I will return to the hon. Member for Glasgow Central on her specific concern about the Bird & Bird note, and I shall make that available to the Committee.

[Alison Thewliss]

I thank the Minister for his offer to write and for the welcome letters he has sent after previous inquiries. Does he accept, however, that this is completely inadequate? We came here this morning with serious questions, and we are being asked to approve the SI without any impact assessment. It is great that the Minister will write to us, but that will be after we have voted.

[John Glen]

I draw the hon. Lady’s attention to the de minimis assessment that was passed as per the rules of the House and that sets out the impact of this SI, as well as to the consequences of our engagement with industry and the regulator that suggest that it is necessary in a no-deal scenario. The hon. Lady refers to specific legal drafting, which I am confident can be addressed. There is scope within the SI programme, in the last four or five SIs, for us to address any issues that have been raised, but the regulations have been scrutinised by the Lords Committee and no points were raised. I do not take her concerns lightly, but when referring to legal drafting I do not want to give an ad hoc response when that would clearly be problematic. I hope that members of the Committee have found this morning’s sitting as informative as I could make it, and that they will join me in supporting the regulations.

Question put and agreed to.