The Government Ban on Credit Card Charges - are you owed a refund?

The Payment Services Regulations 2017 came into effect on 13 January 2018, and brought  into force the requirements of the Second EU Payment Services Directive (“the Directive”).  This means it is now classed as unlawful for retailers to apply surcharges when a consumer is making a payment via a debit or credit card. The aim of the new rules are to ensure transparency when a consumer is making a purchase, allowing them to make informed choices.

An example of when a surcharge may be added is general household bills, council tax, airline tickets and your family holidays. It is estimated that British citizens paid up to £166 million in 2015, according to the UK Treasury.

What has changed?

Traders are no longer allowed to add additional charges to a payment transaction that could result in a ‘profit‘. This means that any charges applied to a transaction should reflect the cost the trader is to incur for processing the payment and not to add to their profit.

Payments made via Visa, MasterCard and American Express as well as PayPal and Apple Pay will be subject to the new regulations. If a company credit card is being used, the rules do not apply.

The ban applies to all organisations across the EU and will remain UK law even after Brexit. It is common to say that most of us have been stung by surcharges when booking flights on most credit cards. On average airlines will charge around 2% of the transaction for making a payment by card. With this in mind, if your flights cost £2,000, the airline would potentially charge £40 just because of your choice of payment. Going forward, the new regulations in place will look to improve/reduce this quite significantly.

It has now been predicted that airlines may look to increase costs for their flights to account for their loss of profits.

What happens if the regulations are breached?

The new rules will be enforced by Trading Standards which will have the power to take civil enforcement action against traders who breach the regulations. It will also entitle customers to receive a refund of any unlawful surcharge they have paid and enable them, if necessary, to take legal action to recover any such surcharge.

Therefore, if you find that a trader has breached the new regulations, reporting this to Trading Standards may result in a full refund being awarded should it be found an unlawful surcharge was applied. If a trader refuses to comply, the maximum penalty is a fine and two years’ imprisonment.

Dee Kundi is a partner at VWV, a national law firm with a growing office and presence in Birmingham.  Dee can be contacted on 0121 227 3720 or at

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