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PRA warns over card charges

10 July, 2013

The PRA has warned that rising charges for processing card payments are threatening the future of many petrol filling stations, and has called on the government to take urgent action.

Plastic accounts for up to 50% of all UK retail business but this has now accelerated to an average of 70% for forecourt sales, so card handling costs are critical.

PRA chairman Brian Madderson said: “In order to accept payment for fuel by card our independent retailers are now being forced to pay increasing merchant service charges (MSCs) over which they have historically had no negotiation and no control. New premium and commercial cards attract higher MSCs and can often result in the retailer taking a loss on the transaction.

“Consumers are attracted to premium and commercial cards for the benefits they offer such as cash back, but it’s the retailer not the card issuer who is saddled with the extra costs. The argument is simple. Is it reasonable for the retailer to fund financial-based marketing incentives offered by the card issuer to their card holders?”

The PRA last month submitted a detailed report to HM Treasury as part of its recent consultation 'Opening up Card Payments' condemning the lack of proper regulation. The same report has also been sent to the director responsible at the Office for Fair Trading, asking that they immediately take steps to investigate this practice which is deemed grossly unfair and anti-competitive.

Madderson said: “The petroleum industry in Germany has successfully argued that Government tax accounts for a very high element of fuel prices (around 60% in the UK) and that fuel retailer margins are extremely tight. This resulted in regulation which forces the card issuers to exclude tax when calculating MSCs and the result is much lower rates, in effect a “petroleum rate”. It is understood that regulators in both Italy and Belgium are now proposing similar for retail fuel transactions.”

He added: “To ensure that the UK maintains a sustainable fuel network, our authorities urgently need to assist hard-pressed fuel retailers. We have 5,000 fewer forecourts than in 2000 and all the independents are carrying minimum fuel stock levels. These penal charges for card payments will cause serious issues for both independent retailers and their customers.

“The Government must act quickly to address the issues of unfair charges associated with premium and commercial cards and to follow the other EU countries by establishing MSCs that reflect the unique pressures of the petroleum industry.”