UK advances plan to cap some credit card fees

(Bloomberg) — Britain’s top regulator is pushing ahead with a proposal that would limit credit card fees British merchants charge on certain purchases made by European consumers, risking retaliation from the continent’s lawmakers over what they see as His own bank was treated unfairly by the UK.

Following a months-long review, Britain’s payments systems regulator found it was appropriate to impose the cap, according to a statement on Friday. Now it will collect feedback on the levels at which caps should be set.

By moving forward with the proposal, the UK could reduce the revenue European banks collect when consumers shop at UK merchants. Currently, every time a customer purchases something online from a UK merchant using a credit card, the retailer pays them a fee equal to 1.5% of the purchase price.

The PSR is considering setting an initial cap of 0.3% on credit card transactions and 0.2% on debit card spending. At this level, members of the European Parliament warned that some European banks could lose money on certain transactions and told the PSR that if the EU retaliated, British financial firms and their consumers would suffer the same consequences.

The regulator said on Friday that the PSR was also currently consulting on setting a cap to allow issuers to bear transaction costs.

“We have carefully considered the feedback we received,” PSR managing director David Geale said in a statement. “We believe consulting on a range of options to cap prices is the best way to ensure UK businesses get a better deal.”

Visa Inc. and Mastercard Inc., which set fees on behalf of banks, raised those fees after Brexit. The PSR review comes as the regulator found UK businesses had paid an extra £150m-200m as a result of the change.

“Artificial controls on interchange do not reflect the business realities of today’s market and, if not set up properly, can negatively impact the value people and businesses receive from card payments,” Mastercard said in a statement, adding, It will continue to participate in the PSR.

Visa said it still disputes the PSR’s overall findings. “It is important to ensure that any measures do not lead to uncertainty and unintended consequences” that could jeopardize “the UK’s leading position as a competitive, prosperous and innovative payments ecosystem,” the report said.

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