HEAD 2 HEAD: YESDermott Jewell says charging customers for using credit cards is discriminatory and anti-consumer. NOBrendan Burgess says a ban would hurt consumers and penalise low-cost sellers.
Dermot Jewell: From the outset, let me clearly state that there must be no doubt that credit card surcharges are, in the mind of any reasonable-thinking person, anti-consumer, discriminatory and they must be removed. Those retailers who add their costs to their "valued customers'" bills suggest that they do so only to recoup the service charge that they pay to the credit card companies as a percentage of the sale. They are doing no more, they cry, than passing on a financial burden that is just too much to bear in these difficult times.
What they never comment upon are the significant savings they make in cash handling, security provision, human resources and insurance costs by card transactions. They utter no word regarding the reality that consumers use their own time, equipment and at their own cost to book online and then pay additional surcharges for no new return and therefore no reason. Why is it that in an environment where one can only pay by credit card (for example, when booking flights online), that the same ridiculous charges are added? Moreover, why have they been tolerated? Well, for a few reasons actually.
Originally it was clearly intended, and legally provided by the "no-discrimination" rule, that retailers should not pass on their transaction charges as an addition to the consumer's purchase price for goods and services. Then, by way of derogation from that norm, at national level, Statutory Instrument No 103 of March 4th, 1997, (SI 103) allowed the promoters of concerts and other events to add a charge to the ticket price - as long as this additional charge was advertised or notified to the purchaser in advance. Over time, this has given rise to what is generally known as a surcharge or handling fee which, in the main, arises on bookings/purchases made by credit card.
More recently, MasterCard's legal challenge at the EU level led, in 2005, to the removal of the "no discrimination" rule and opened the way for more passing-on of charges by retailers. It is noteworthy that the rule is still applied by Visa International.
Any consumer booking a holiday in recent years will have forked out a quite significant sum of additional money if paying by credit card. Yet, if they had opted to pay by cheque, cash, beads or blankets it would have cost them less. So now we have a very mixed and confusing marketplace for the consumer. In what has been a classic bandwagon-jumping exercise, we now have ever-increasing numbers of retailers and service providers who clearly fall outside the scope of SI 103 and who make no discrimination between MasterCard or Visa cardholders, who have taken to imposing surcharges. These are termed service charges, booking fees, administration fees and a whole plethora of similar augmentations to what are simply additional monies being demanded from customers because they used their credit cards to pay. Such a charge is not imposed in respect of other forms of payment.
What is significantly worse is that, when you consider how few consumers can actually afford to pay off their credit card bill at the end of the month, you begin to see the outlandish situation where interest is being paid on top of these surcharges.
The Consumers' Association of Ireland wrote to Minister Micheál Martin in May 2006, detailing our discussions with the Irish Bankers' Federation and the Financial Regulator and outlining our collective concerns regarding the negative impact these charges were having on consumers and the market.
This has nothing to do with competition. It most certainly has nothing to do with cash management any longer. Every positive element in that field has been obliterated when it comes to consumer benefit and customer relations and it is high time that we woke up to that reality and put a stop to it.
Hopefully, the responses to Mr Martin's consultation on this matter, within the provisions of the Consumer Protection Act, 2007, will recognise this reality. It must do so for two reasons. Firstly, there can be no doubt but that the industry will lobby hard to retain these charges, even at EU level. Secondly, because it is long past the time for Irish consumers to stand up and demand an end to unfair terms and unrealistic charges.
This move to extract even more money from consumers, for no return, now clearly indicates how skewed and unrealistic this activity has become in its solely profit-driven focus and mission. While the regressive nature of such surcharges will come as a shock to some, it is the calculated intention to bleed the customer dry that more readily reflects today's mindset, and which dictates how determinedly we must resist these surcharges and outlaw them.
Dermott Jewell is chief executive of the Consumers' Association of Ireland.
Brendan Burgess: I am an empowered consumer. I shop around. If I am buying something for more than €100, I ask for a discount. Most shops will agree. When the shop refuses, I offer to pay by cash instead of by credit card. I nearly always get a discount. The Government is planning to ban payment surcharges. If it does, then the inspectors from the National Consumer Agency will prosecute the shop for breaking the law.
Frankly, I believe that the National Consumer Agency has better things to be doing. It should be prosecuting businesses for false and misleading advertising and for unfair commercial practices. It should be prosecuting garages for turning back clocks. It should be prosecuting scammers for promoting pyramid schemes. It should not be prosecuting consenting adults for freely agreeing the price they pay for goods.
So why does a business offer a discount for paying in cash? It's simply because it costs them less. If I pay by credit card, the business has to pay the credit card company 3 per cent of the purchase price. If I buy something from an impoverished artist for €400 with my credit card, the artist gets €388 and the credit card company gets €12. That's why I go across the road to the ATM and pay by cash. I would prefer to see that €12 in the artist's pocket or in mine.
There are some companies that compete on the basis of being low-cost providers. They cut costs wherever they can and they pass these on to customers. The discount retailers Aldi and Lidl don't accept credit cards because it would cost them as much as 3 per cent. Some travel agents accept credit cards but impose a surcharge. This is a competitive free market in operation. As long as companies display the surcharges for credit cards prominently, then customers should have no complaint.
James Adam auctioneers charges 2 per cent extra if you pay by Visa and 3.5 per cent extra if you pay by American Express. Why? Because American Express charges James Adam more than Visa charges for these payments. James Adam sells paintings on behalf of clients at auction. If they sell something for €1,000, they charge a commission of 15 per cent or €150. If they did not charge a surcharge for someone paying by American Express, they would lose 3.5 per cent of this 15 per cent or almost a quarter of their revenue. If surcharges on credit card payments are banned, many businesses will simply stop accepting credit card payments. How can this be in the interests of consumers?
The best protection for consumers is competition, choice and information. The Government should not regulate prices except where monopolies exist. It should make sure that businesses do not engage in anti-competitive practices. It should make sure that companies do not abuse their power to exploit consumers through misleading advertising and unfair commercial practices. But it should not get involved in setting prices.
The same principle applies to payment by direct debit. It is far cheaper for a large company that bills customers monthly to collect payment by direct debit. It is very expensive to process cheques and cash. Those customers who are cheaper to process should get the benefit in terms of reduced price. Many voluntary groups offer members inducements to pay their annual membership subscriptions by direct debit. This could be a reduced rate, a free T-shirt or an additional month's free membership. If the proposed legislation is implemented, they could be prosecuted.
It is argued that charging less for direct debits penalises people who don't have bank accounts. But why don't they open bank accounts? It's not difficult.
Encouraging people to use direct debits would encourage them to have bank accounts, which would be good for consumers. And the law should not be changed to penalise the majority for the protection of a minority.
The Government has devoted considerable resources to a project called betterregulation.ie. This is a pet project of the Taoiseach. The principles include reducing red tape and requiring higher standards of evidence before introducing new regulations.
A regulation should only be implemented if it's clearly in the interests of consumers and has no negative side-effects for the people whom it is supposed to protect. At the end of the day, consumers pay for all regulation through higher prices or through taxes for implementing the legislation. Few consumers will benefit from a ban on payment surcharges. We will all pay for it.
Brendan Burgess is the founder of the consumer website Askaboutmoney.com. These opinions are his own.
Last week Danny O'Hare and Richard Morrisroe debated the question: Should university fees be reintroduced? Here is an edited selection of some of your comments:
How can people consider re-instating fees in any form in this current socio-economic climate? Class struggle still exists and the increase in lower class attendance in third-level education would be reversed instantly. - Keith O'Brien
Does the proliferation of grind schools and the numbers clamouring for a private secondary (and often also primary) education not tell us something? If you can afford to pay for private education and expensive grinds, then you can afford to pay for third level, or at least some sort of contribution. Our current system hasn't enabled those from disadvantaged backgrounds, as year on year published figures show which are the top feeder schools to Irish Universities. It is ridiculous in this land of property millionaires, 07 SUV's, bling and bluster, that fees are not introduced. A serious reality check is needed in the national psyche and a re-evaluation of what is fair, equitable and affordable. Those in doubt need to take a trip to their nearest campus, and while many students do work in part-time jobs throughout their college years, Irish students have considerably more spending power today (designer clobber, cars and foreign holiday) than ever imagined. Some of this spending should be directed towards financing the actual education. - Tarah
The comment about feeder schools is somewhat inaccurate, as this is really only an issue in Dublin. If you look at the feeder schools for the non-Dublin colleges, most of them are public. And while some people have done well from the Celtic Tiger, many haven't. Would we deny them an education which could help improve both their lives and the overall quality of society? - Peter
I don't think anyone who is advocating the return of fees is suggesting that everyone would be subjected to them. Pretty much all opponents of fees cite this as the main reason for not introducing them, that it would be a burden and a massive deterrent for poorer students. Funding for both teaching and research has to be improved and unless the Government wants to pick up the tab, someone has to pay for this. Wealthy parents, for a start, should be made to meet the full cost of their children's education; the State should not be handing them this massive subsidy, when they can afford it themselves. The present Mechanism for Grants should be expanded. - Conor Sullivan
What Richard doesn't seem to realise is that we are nearing the point where the continuing education of undergraduate students by universities in Ireland is fast becoming uneconomic. There is a reason why the universities now aim to be research-led - this is where the money is, and undergraduate teaching is, and will continue to suffer. In a climate where taxpayers, are unwilling to fund the necessary expenditure, reintroduction of fees seems the only alternative. Once the capacity to deliver quality undergraduate education is gone, it is gone. It will not be rebuilt in our lifetimes. - Aluminus
I have a vivid memory of the September after third-level fees were abolished. University staff could not find parking spaces on campus as fees had been converted into cars . . . - Marie Ireland
Ireland is educating an excessive proportion of its population at third-level, even as the shortage of blue-collar workers has become ever more acute. Immigration has made up the difference, but it hardly flatters national equality to require foreigners to come to Ireland to perform jobs that superfluously educated Irish people consider beneath them. - Paul Tighe
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