OFT to take action on airlines' credit card charges
THE Office of Fair Trading (OFT) gave budget airlines a slap on the wrist this week for charging high and often misleading fees for customers who choose to pay by card.
Cavendish Elithorn, Senior Director of the OFT's Goods and Consumer Group, said that he was prepared to, "take enforcement action against any businesses that do not respond to today's announcement and instead continues to use misleading surcharging practices."
The OFT's warning follows a super-complaint filed by Which?, the consumer protection group.
The complaint accused airlines, local councils and retailers of levying 'excessive' charges on their customers, just for paying on plastic.
The regulator had 90 days to launch an investigation into the evidence put forward in Which?'s super-complaint submission.
That investigation found considerable evidence that companies were using "drip pricing" practices designed to saddle the cardholder with extra charges after they have laboured through the multiple web pages required to make online payments.
Much as trench warfare was designed to weaken the will of the enemy, companies adopting drip pricing policies are aware that a cardholder's will to fight is considerably diminished near the end of long winded transaction when the surprise charges are added.
The OFT investigation focused on the passenger transport sector or, to be more precise, the airline sector which is already well known for levying the bulk of high-profile card surcharges.
It reported that, during 2009, UK consumers spent £300 million on payment surcharges.
The UK Cards Association supported the OFT investigation and concurred that some companies instigated surcharges that were far beyond the actual cost of processing a card transaction.
For example, Ryanair charges customers a £6 admin fee per flight bought using a debit card. Which? has estimated that the true cost of processing card payments such as this as no more than 20p.
Waiting for the law
However, how far the OFT can actually use "enforcement action" to pinpoint and punish companies using excessive forms of surcharges is another matter.
While the OFT has demanded that traders stop charging consumers for paying with debit cards, it concedes that they should still be able to impose surcharges for consumers paying using credit cards.
Although the OFT's announcement does mark an important beginning in permanently ending the increasing trend for adding extortionate surcharges.
The OFT itself doesn't have the power to force airlines to change their pricing - that can only be done by the introduction of a law.
"We believe there is also a strong case for a change in the law so that the cost of using a debit card, the almost universal payment method for today's online consumers, is always included within the headline price," said Elithorn.
Some travel companies such as Monarch Airlines have already dropped their debit card surcharges, with a number of others agreeing to remove them.
It remains to be seen whether others in the sector follow suit and whether charges will be added elsewhere.
Judging by the Monarch decision, it seems likely that credit cards will form a large part of that 'elsewhere', a particular blow to those keen to take advantage of the statutory protection offered to purchases made on a credit card under law.
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