EU Interchange Fee Regulation to see UK debit card charges increase

The Interchange Fee Regulation is a piece of EU legislation recently implemented in the UK, the EPR Retail News website reports. As a result of this introduction, UK consumers may have to pay more for debit card charges when shopping with some retailers, but fees should be reduced for many.

The Interchange Fee Regulation is designed to reduce the hidden 'interchange' fees levied by banks on retailers when consumers pay by card. The British Retail Consortium (BRC) has campaigned against excessive credit card fees imposed on retailers and consumers by banks and specific credit and debit card schemes for a number of years. These fees can reach up to £1 billion per year, but the new rules will reduce credit card fees by up to 0.3%.

A cap of 0.2% of the value of the transaction has been chosen by the UK Treasury, known as a 'weighted everage'; this means that some retailers taking debit payments may now need to pay more. It is argued that a better option for the UK in light of the effects of this legislation would be to set a cap at 0.2% with a maximum fixed cap of 3.5p. This choice would be more beneficial for retailers and offer UK consumers more competitive prices and improved services with regards to their choice of card.

In order for the UK to better compete against other countries such as Belgium, Denmark and Ireland, a cap of below 0.2% is recommended.

The BRC Chief Executive, Helen Dickinson, said: "The implementation of card fee caps is long awaited and welcome but the choice of a 'weighted average' for debit card fee cap is not the best approach".

She believes that choosing this cap will "deprive consumers of improved services or even more competitive prices". She noted that the BRC plans to work alongside the regulator to recommend "a lower debit card cap as soon as possible".