OFT gets tough over hidden card charges

Travel companies are being threatened with enforcement action by the Office of Fair Trading for misleading customers over debit and credit card fees.

The OFT has ordered airlines and other travel companies to be upfront, instead of making customers click through pages and pages online before "surprising" them with the surcharges.

The move follows a 'super-complaint' by Which?, the consumer rights publication.

A 90-day OFT investigation found "considerable evidence" of companies using "drip pricing" practices for surcharges online.

"This practice is particularly prevalent in the airline sector - where the OFT estimates UK consumers spent £300 million on payment surcharges during 2009," said the OFT.

The OFT considers that surcharges are potentially misleading to consumers when they come as a "surprise".

"The OFT is currently discussing surcharging practices with a number of passenger travel companies to secure compliance with Consumer Protection Regulations and will take enforcement action as necessary," it said.

The OFT is asking the Government to change the law to prohibit surcharging for all debit cards.

Cavendish Elithorn, senior director of the OFT's Goods and Consumer Group, said:

"The growth of internet retailing has brought massive benefits, but the increasing use of card surcharges is not one of them. You can't buy online with cash and people are frustrated about being asked to pay for paying.

"Consumers find it harder to shop around and find the best deal if they have to invest time and effort in discovering surcharges. This also weakens competition between retailers which is bad news for the UK economy.

"We recognise that most traders want to treat their customers fairly. Many already meet the minimum standards we expect under the law and we have secured a clear commitment to change from others.

"However, we will take enforcement action against any businesses that do not respond to today's announcement and instead continue to use misleading surcharging practices."

Bob Atkinson, travel expert for travelsupermarket.com, said it welcomed the OFT's decision.

"Whilst there are some charges associated with taking payments by debit card to travel providers, there is no excuse for the high costs consumers currently face.

"Travel companies have clearly been seizing an opportunity to cash in and we will hopefully see an end to this practice, something recently embraced by Monarch Airlines with its dropping of debit card charges. We now call on the travel industry as a whole to respond in a timely manner to these findings.

"We are also pleased that the OFT found that credit card charges should be more transparent to customers, enabling them to make informed decisions when buying their travel.

"However, charges imposed need to be reasonable and on a percentage basis as opposed to a per person charge. We have not yet seen anything around this issue in the information supplied so far by the OFT and the lack of clarity on the credit card issue is very disappointing."

He added that the Government should now take action to stop these unfair practices once and for all through legislation.

With permission from Travelmole

And the immediate problem here is that the OFT and UK government have no powers over bookings made with foreign companies on foreign websites - like Ryanair. So even if the UK Government does change the law it may not help. If the UK airlines are forced to change it might alter the market enough to force Ryanair, Wizzair etc to join in but don't hold your breath just yet.

I've always thought it would increase pressure on businesses if card statements disclosed exactly what charge the trader had paid for each transaction. Once a debit card user saw the difference in what they had been charged and what the actual charge was, it might affect who they did business with in future.

Steve, even though Ryanair are based in Ireland, and not subject to uk law, I think the fact that they do the major business here in the uk, they would have to comply with any law, the government sees fit to pass

Ryanair are already claiming to be unaffected by all of this, as they do not charge either debit card or credit card fees. What they charge is an 'administration fee' per passenger, per one way flight, which they say relates to the costs of their website and booking system. However, flights which are paid for by Prepaid Mastercard are not levied with this booking system 'administration fee'.

David

Joe- Ryanair are only liable to comply with UK law for what actually happens in the UK*. Your booking takes place under Irish law* since the site you book on is Irish (just as though you phoned them up in Dublin). Their advertising in newspapers or TV in the UK is actually in the UK so is covered by UK rules. The way they handle disabled passengers at Stansted (stated case!!) is covered by UK law because the airport is in UK.

*some things specific to international air travel are covered by international treaties instead of local law.

It's a bit premature for any airline to say that their "administration charges" are not covered by the law since the law hasn't even been written or passed! It could be worded to cover that angle in which case they'd have to find a new way to take money out of your pocket for doing nothing.

Another part of the OFT compaint was the way the charges don't appear until the end, they want the extras to be shown at the start of the booking process. So instead of starting with a fare quote for a flight of £9.99 and then gradually £100 of extra charges appear you start with a price for all the charges on that route (tax, airport, "admin") before you see any fares for specific flights. This is subtle - huge extra charges at the start may put people off before they even see the fare unlike the current situation where they get hooked by the initial low price and wound in with the charges.

So the could in effect be written

Any Administration/Booking Charges which is free to those with a certain card type is a card charge

I am assuming Easyjet is a greek airline?

Are Jet2 and Flybe British? Not heard anything from them about the card charges/one price proposal?

Easyjet is legally British (flights to/from Switzerland using EZS codes are operated by their subsidiary Easyjet Switzerland). The website is registered in Britain. It's the fact that he built such a successful British brand that got Stelios his knighthood - if he stayed in Greece he'd probably own the country by now!!

Jet2 are British (well Yorkshire!) and are owned by Dart Group PLC

Flybe are British now but were founded in Jersey which could have left them outside the proposed legislation had they stayed there!!

I like your suggested wording - I'm sure Mr O'Leary would disagree....

OFT to investigate airline card charges

Airlines are to be investigated following claims from consumer groups that they are deliberatly hiding card charges from customers booking flights onlne.

The Office of Fair Trading warned airlines in June, following a super-complaint from the consumer group Which?, that unless they included debit card fees in their advertised fares it would take action against them.

Several carriers have since amended their websites to make card charges clear from the outset, but the OFT yesterday launched a formal investigation after consumer groups warned that several carriers were still only adding card charges at the end of the booking process, making it hard for customers to compare fares.

Card fees are believed to have cost UK air passengers an estimated £300m last year, with some airlines charging as much as £6 to £8 per passenger.

The airlines under investigation have not been named, but the OFT said several were involved and, according to the Financial Times, Flybe and Lufthansa and its subsidiary bmi are amongst those complying with the watchdog's investigation.

The OFT stressed that it was not assuming that any airlines were guilty of wrong-doing.

"If we do find airlines are breaking consumer protection laws, we could seek a High Court Injunction to force them to change their practices," said a spokeswoman. "We announced in June that, as customers have to pay for online bookings with a card, airlines must include debit card charges at the outset and we warned then that if they didn't we would be minded to take action.

"We have now launched a formal investigation."

Earlier this week, the consumers' association Which? pressed the government to ban surcharges for those booking flights using a debit card.

The OFT recommended the move and the Treasury said it was considering the recommendation.

With permission from Travelmole

Let's hope then, that once and for all this will be stopped. There's nothing worse than going through the whole booking process then being slapped with extra fees.

I thought 'good news' at first but looks like Ryanair and friends will still get around the law...

was there ever any doubt about that?

Pre-ticked boxes selling extras banned

Airlines will no longer be able to add pre-ticked boxes selling extras like insurance under new legislation approved by the European Union.

EU ministers meeting in Luxembourg have passed a set of rules aimed at strengthening consumer rights, which the EU parliament backed in June.

Online traders will have to disclose the total cost of a product - including fees - and customers will have to actively opt-in to extras.

Consumers will be exempt from costs if they were not 'properly informed' before purchase and will now have a 14 day ‘cooling off' period.

Travel firms, which will not be allowed to make a profit from the charge levied on customers for using a credit card and will only be allowed to charge customers basic call rates, have two years to implement the rules.

With permission from Travelmole

Someone in Dublin is going to "love" this.
End of Next Year
Although "small processing fee" will still be allowed. But that will just be the proceesing charges. However if it is related to this then it potentially also include Credit Cards.
Consultation early 2012.

that's the problem Helen, if the company is technically trading from Dublin or anywhere else outside the UK this ruling can't be applied. The only hope is that if the UK based airlines drop the charges it will create a market pressure on the others or will spark other governments, or even the EU, to do the same.

The other thing I mentioned that it is the british government enforcing something early. This is actually EU legislation. Which has to be enforced within 2 years anyway or so I believe. However this was rubber stamped July 2011 meaning full enforcement will only be 6 months or so later than UK enforcement in part or in full.

Does it really matter?

Surely all operators will just increase the price of their ticket by x amount to cover this withdrawal. I really cant see the travelling passenger seeing any benefit at all...except the price will be higher up front.

Nivsy

It could matter, EC261 refunds and some insurance payouts don't include card charges - if the cost is in the fare where it should be and something goes wrong you can get it back. So even if the bottom line doesn't change there could be hidden benefits.

If Ryanair claim that there admin fee are not credit card fees, so how will they account for pre-paid master card, which they have stated before...use pre-paid master card to advoid admin fee

But if they were aware of the change in the law, does this explain a change in there t&c

well that's a very good question, if the card specific charges are kept seperate then any genuine admin fees will be the same however you pay. If they are made the same for every passenger on the flight they would have to be included within the price in any UK advertising, if they are variable there will always be a whiff of fiddle about it.