OFT expands the scope of its investigation on UK plastic card charges
The Office of Fair Trading (OFT) has announced that it now intends to immediately expand the scope of its current ongoing investigation into the fees that are charged by UK plastic card providers on "interchange" fees - the fees that retailers are required to pay to UK banks that issue the cards – to include fees that are paid on immediate debit card purchases, as well as those plastic cards that form part of its current investigation.
Although the OFT has had an ongoing investigation into the interchange fees that MasterCard charges retailers since 2000, making it the longest running investigation ever undertaken by the OFT, to date this investigation has been limited to MasterCard’s interchange fees on consumer and commercial credit cards, charge cards and deferred debit cards. In October 2006 the OFT broadened the cope of its investigation to also include the interchange fees that Visa charges on its customers consumer and commercial credit cards, charge cards and deferred debit cards. This latest announcement will now include immediate debit cards.
Overall, the fees being charged by UK credit card issuers have increasing come under the scrutiny of both the OFT and the public, and in September 2005 the OFT said that interchange fees were "anti-competitive" and helped to push up the price of consumer goods in the UK – likening the fee to a tax on UK consumers.
The OFT’s statement announcing the expansion of its current investigation states that: "The expansion of this investigation is consistent with the scope of the European Commission's current investigation into MasterCard's European intra-regional interchange fees. In conducting the new investigation, the OFT will seek information from card issuers and other parties as it considers appropriate."
Although the initial OFT investigation, in part, forced MasterCard to change its policy on the way it charged interchange fees, in February 2006 the OFT announced that it was amending its investigation to include the new fee structure that MasterCard had put in place.
This latest announcement by the OFT adds further woes to UK banks and credit card issuers and comes as the OFT is already investigating the fees that UK banks charge their customers on current accounts (in particular, the amounts being charged on unauthorised overdrafts). In April 2006 the OFT announced that charges made on UK credit cardholders who failed to make the minimum repayments were unfair, forcing UK credit card issuers to lower their late payment fees to £12 or less or run the risk of having their fees declared "unfair".
Nonetheless, the OFT's announcement today is likely to please customers of plastic and credit card issuers in the UK, the retailers being forced to pay the interchange fees, as well as those politicians who are currently calling for a fuller investigation in to the way that UK banks and financial institutions currently undertake their businesses.
Richard Smith
9th February 2007
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