The path is now clear for the final adoption of an EU law which will cap inter-change fees charged by banks to traders whenever the latter accept payment by card from a consumer. Both the European Parliament and the European Council have trashed out their differences and agreed on the final text of this law which might result in lower prices for all EU consumers.
Interchange fees are those fees which are charged by a cardholder’s bank to a retailer’s bank every time that a consumer makes a card-based purchase. These fees are ultimately absorbed by the consumer since retailers often pass on such fees to consumers by adding them onto the prices charged for the products which they sell. Currently, the level of the interchange fees varies widely between EU member states often resulting in a difference in prices charged for the same product depending on the member state in question.
Retailers can now know where they stand when deciding to accept card-based payment transactions or otherwise
The new law stipulates that certain maximum levels for interchange fees will apply as from six months after the entry into force of the regulation. The capping will apply to both cross-border and domestic card-based payments. For all credit card transactions, the maximum charge for the retailer will now be that of 0.3 per cent of the value of the transaction whereas for all debit card transactions, the charge will be that of 0.2 per cent of the value of the transaction.
In so far as all domestic debit card transactions are concerned, member states have the discretion to allow a per transaction interchange fee of no more than 5 cents in combination with a maximum percentage rate of no more than the 0.2 per cent of the transaction value. This is only permissible provided that the sum of interchange fees of the payment card scheme does not exceed 0.2 per cent of the annual transaction value of domestic debit card transactions within each payment card scheme. Moreover, during the first five years of the application of this law, member states have the option to apply the 0.2 per cent cap calculated as an annual weighted average of all domestic debit card transactions within each payment card scheme.
The new regulations are intended not only to cap charges but also to ensure that there are transparent mechanisms in place which allow retailers to be aware of the level of fees paid when accepting cards.
The European Parliament will now vote on the text at its plenary session in April 2015 and the European Council will then provide its official endorsement prior to publication of same.
Whether these new rules will indeed have the desired effect of providing a level playing field for European consumers and retailers alike is something which will need to be tried and tested.
With clearer and more transparent pricing policies for interchange fees in place, retailers can now know where they stand when deciding to accept card-based payment transactions or otherwise.
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.
mariosa@vellacardona.com