Business, Innovation and Skills

Nicholas Dakin Excerpts

Tuesday 20th December 2011 Commons Chamber

[Nic Dakin (Scunthorpe) (Lab)]

Thank you, Mr Deputy Speaker, for calling me to speak in this Christmas special.

Thanks to the vision of a Labour council supported by a wide range of stakeholders and community groups in north Lincolnshire, Scunthorpe now has a fantastic new performance venue, the Baths hall. On Sunday, the Scunthorpe choral society joined forces with the award-winning Scunthorpe junior co-operative choir to give their annual carol concert in that state-of-the-art venue. Their performance was fantastic. However, many people booking tickets for the cover price of £10 found themselves paying an additional £1 of credit or debit surcharge—a hidden cost not seen until the purchase was in progress. That is just one illustration of the widespread use of surcharges, which I want to highlight today.

It is estimated that 94% of the UK adult population holds a debit or credit card. Debit and credit card users are facing increasingly high surcharges when purchasing goods and services. Rip-off surcharges are often hidden until the end of the payment process, so it is impossible to tell how high the charges will be until the final payment is made. The argument is made that these charges cover transaction costs. In truth, it costs companies only about 20p to process a debit card payment and no more than 2% of the transaction value for a credit card payment.

In March, Which? asked the Office of Fair Trading to investigate the charges for paying by card. It is not only individuals and businesses that suffer from the practice of excessive surcharge, but retailers too. The British Retail Consortium representing retailers believes that Which? was right, in its super-complaint, to draw attention to excessive charges levied on customers using debit or credit cards. Retailers themselves face significant difficulties when handling card payments. The widely varying fees that banks levy on retailers for processing the different payment methods is a big issue for them.

Results from the British Retail Consortium’s most recent cost of collection survey show that, on average, the banks’ charges for processing a credit card transaction are 15 times higher than for cash, but responsible retailers protect card-using customers from the banks’ excessive charges on them. Responsible retailers have been engaged in a long-standing campaign to bring those fees down to levels that reflect the actual, very low, costs of processing transactions. The BRC believes that banks should play fair by their customers, as responsible retailers do with theirs.

In times of austerity, when as a nation we must all find ways to save money and tighten our belts, tackling excessive surcharges seems a fair and reasonable way to put money back in the pockets of consumers, squeezed family budgets and businesses. Action has already been taken in order to try to tackle excessive surcharges. The Which? super-complaint, challenging the practice of excessive surcharging, was upheld in June by the Office of Fair Trading. Over 43,000 members of the public pledged their support for the campaign. The OFT recommended that businesses make payment charges transparent by including the price of transaction fees in headline prices.

The OFT also recommended that the Government take regulatory action on surcharges. There are two options: the Government could wait until 2014 and implement the consumer rights directive that has recently been passed by the European Parliament. That will place a limit on the amount of a surcharge. However, that will only cap surcharges, not eliminate them altogether, and nothing will happen until 2014. Two years is a long time to wait, and we need a solution now as surcharges are hurting family pockets and businesses now. An alternative and, I believe, preferable option would be to amend existing UK law, namely the payment services directive. An amendment to article 52(3) would not only control surcharges, but could eliminate them completely. As the hon. Member for Cambridge (Dr Huppert) said earlier, it is important that action is taken now.

In closing, I reiterate that these rip-off surcharges are just that—a rip-off. They rip off individuals, families and businesses. At a time when we want to cut costs and save money, I urge the Government to take urgent action. I urge Ministers to think clearly and act swiftly. Let us not wait for the EU directive to take effect in 2014. Let us show the public that we as a Parliament can act speedily and responsibly in the interests of our people, and end these rip-off surcharges as quickly as possible by using the powers available to us in this House.