The European Commission tabled proposals yesterday (24 July) aimed at reducing the cost of using payment cards for consumers, setting new fee limits at 0.2% and 0.3% of the transaction value for debit cards and credit cards respectively.
The new Payment Services Directive, with a separate regulation on multilateral interchange fees (MIFs), could see €6 billion annual savings for retailers, according to the proposal presented by Michel Barnier, the EU's Internal Market and Services commissioner, and Joaquín Almunia, competition commissioner.
Under the proposals the new MIF caps will apply from the date of entry of the new rules on cross-border transactions, with domestic transactions within member states to follow suit within two years.
MIFs are charges paid by a retailer to a cardholder’s bank as part of an electronic payment card transaction, whether through a debit or a credit card. Nominally, they are designed to share the cost of processing payment card transactions between buyers and sellers.
"The interchange fees paid by retailers end up on consumers' bills," Almunia said in announcing the measures.
The Commission hopes that the estimated €6 billion each year that it believes will accrue to retailers will translate into price cuts for consumers.
In addition the new rules will prohibit surcharging on internet transactions such as additional charges levied for paying by card for airline flights purchased online. The EU executive believes that this prohibition will save consumers €730 million annually.
Big card companies will be most affected
"Retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices," said Almunia.
The rules will primarily affect Visa Europe and MasterCard, but branded commercial cards issued by retail outlets will not be covered, nor will commercial transactions, and American Express, which operates differently from its rivals, will also be largely unaffected.
If lawmakers in Brussels hammer out final details of the rules before European Parliament elections next year, the law could be in place in 2015.
The proposals also include data protection, security and liability requirements for non-bank companies that offer online payment services, in an attempt to capture new internet payment systems within the regulatory framework.
An unconditional refund right for direct debit payments will offer consumers the right to demand refunds from banks where a company does not fulfil its contractual obligations.
Stakeholder disagreement over who benefits
A European Retail Payments Board is also to be established to put consumer representation on an equal footing with banks regarding the Single Euro Payment Area (SEPA).
The new law would mark the end of a long battle between the Commission and card firms Visa Europe and MasterCard (see background), and a hard-fought dispute over the potential benefits to consumers.
Consumer group BEUC welcomed the end of what they called "shameless" surcharges. The retailer association Eurocommerce welcomed the proposals, but said that – in respect of debit transactions – the cap did not go far enough and should have been total.
Meanwhile, many smaller consumer associations contend that the proposal would not result in lower prices for consumers, but would rather benefit larger retailers (see positions below).
Barnier dismissed such claims, reprised previous criticism of MasterCard over its lobbying, and indicated that if the proposals become law a review would follow after four years to determine the real effects on retail prices.