DEBIT CARD FEES
NFDA members have made a significant effort in recent years to encourage their customers to change their method of payment from cash, and to instead use debit cards. This change was effected by HMRC’s Money Laundering Regulations and demonstrated an active decision to put fraud prevention measures in place by transferring to a more traceable method of payment. NFDA viewed this as a positive move to combat such crime and encouraged its members to change the way it took payments from customers.
Interchange is the fee paid by the retailer's card acceptance provider (acquirer) to the card issuer each time a card payment transaction occurs. Since the publication of the European Commission’s proposal for regulation of interchange fees in July 2013, the methods with which card handling fees were charged have been drastically amended.
Changes to Interchange Fee Regulation (IFR)
Following the published proposal by the European Commission, the Government announced that from December 2015, debit card interchange fees would no longer be capped at 50p per transaction, but instead would be limited to a maximum of 0.2% on the overall transaction value. In practice for vehicle retailers, it meant that a vehicle worth £10,000 would be liable to a £20 charge if it were paid via a debit card, having previously been just 50p.
In July 2017, HM Treasury published the outcome of its consultation titled Implementation of the revised EU Payment Services Directive (PSDII). This revealed that the Government would ban surcharging on all types of payment from the beginning of 2018. This ban has greatly affected automotive retailers, who are now being forced to inherit far greater transaction costs, reducing their already minimal margins.
NFDA Position on IFR
NFDA supports the re-introduction of a cap for higher value goods and services.
With the UK set to leave the European Union in March 2019, NFDA sees this an excellent opportunity for UK divergence from EU regulation. By reducing administrative costs such as interchange fees, the UK can present itself as a more attractive place to conduct business. This will also not punish retailers for their conscious efforts to support money laundering regulation.
NFDA Action on IFR Changes
Over the past year, NFDA has been in frequent contact with officials within HM Treasury to voice its concerns over the impact that Interchange Fee Regulation (IFR) changes have had on the automotive retail industry.
Whilst continuing to respond to consultations on payment services by HM Treasury, NFDA has also written to the Economic Secretary to the Treasury, to highlight two key factors. Firstly, the significant contribution the UK retail automotive industry makes towards the whole UK economy and, secondly, the negative impact IFR was having on the sector.
In December 2017, representatives from NFDA met with officials from the Treasury to shed further light on the impact IFR was having, as well as provide early indications of the impact the ban on surcharging was having. In unequivocal terms, NFDA made the case to the Treasury that ultimately it would be consumers who bear the brunt of these changes and that the Government must consider the re-introduction of a cap post-Brexit, when this legislation can be amended.
Upon the Treasury’s request, NFDA has submitted data highlighting the exact impact IFR was having on the industry, and has been invited to provide further figures on the impact the ban on surcharging is having on NFDA members.