OFT orders low cost airlines to drop debit card surcharges

It is also calling for the Government to change the law to abolish charges on all debit cards.

OFT has put travel companies on notice to change their surcharging practices or they will face enforcement action under consumer protection laws. It wants headline prices to be “meaningful and comparable”.

Low cost airline Ryanair says that it already follows best practice when it comes to surcharges and says that it does not impose any such debit or credit card fees. It adds that Ryanair’s optional fees, including its administration fee, are fully avoidable by all passengers.

The Mastercard prepaid card is the only card to which Ryanair does not apply charges.

EasyJet’s corporate affairs manager Andrew McConnell, says: “EasyJet has built its reputation on making airline pricing simple and transparent. We want to make things easier for the consumer so we’d like to see card charges incorporated into the headline fare, however, for consumers to benefit there needs to be a level playing field.

“UK legislation would be a step towards this but we’d encourage the Government to push for a European wide solution. The only way to ensure consumers can make easier price comparisons is if a common treatment of card charges can be agreed across the whole of the transport sector in Europe (including train operators and online travel agents). EasyJet has offered to work with the OFT in bringing such a change about.”

The OFT began investigating the issue following a “super-complaint” from Which? and it found “considerable evidence of companies using ’drip pricing’ practices for surcharges online”, with payments being added to the total booking price after customers had already filled in several web pages of detail.

It says that the practice is particularly prevalent in the airline sector and estimates that UK consumers spent £300 million on payment surcharges during 2009.

The regulator wants traders to stop charging for paying with any debit card but will allow credit card surcharges provided that they meet the minimum transparency requirements.

These include making sure that whenever prices are displayed on a website, surcharges must be made clearly available via just ’one click’ and not simply be revealed at a late stage in the shopping process; and also that retailers should clearly reference card surcharges on any advertising material when prices are being promoted.

The OFT is now discussing surcharging practices with a number of passenger travel companies to secure compliance with Consumer Protection Regulations.

Cavendish Elithorn, senior director of the OFT’s goods and consumer group, says: ’”The growth of internet retailing has brought massive benefits, but the increasing use of card surcharges is not one of them. You can’t buy online with cash and people are frustrated about being asked to pay for paying.

“Consumers find it harder to shop around and find the best deal if they have to invest time and effort in discovering surcharges. This also weakens competition between retailers which is bad news for the UK economy.”