Abta and Aito have hit back over a government accusation of “rip-off card charges” in travel after the Treasury confirmed card charging will end in January.
The EU Payment Services Directive (PSD2) will ban charges for Visa and Mastercard debit and credit-card payments.
The Treasury went further last week by also banning charges on American Express and PayPal transactions and suggesting surcharging “is common”.
In fact, UK businesses are barred from surcharging other than to cover the cost of card processing, currently about 1.2%-1.3% per transaction for agents or £12‑£13 on a £1,000 booking.
Yet from January 13, no card charges will be allowed. Businesses must absorb the costs or pass them on to all customers, either by raising prices or adding a fee to every transaction, with the fees also requiring the addition of VAT.
Abta agreed “rip-off charges have no place”, but warned: “Preventing companies passing on often excessively high charges when taking card payments risks increasing prices for everyone.”
It demanded ministers “address the high level of fees [for] card payments”.
Aito chairman Derek Moore accused ministers of “ignoring the facts”, saying: “It’s the banking sector that imposes varying charges depending on the type of card. Operators and agents have no idea when accepting credit cards what they’ll be charged.
“Operators will be forced to increase prices across the board.”
UK Card Association data suggests the ban on credit-card charges will cost agents at least £90 million a year at the 1.2% rate. But credit-card use is expected to rise without charges because of the financial protection offered and the need not to pay upfront.
The Air Travel Insolvency Protection Advisory Committee (Atipac) also warned card-processing costs could rise, pointing out in a report to government last week: “The card industry paid the cost of the [Lowcostholidays] failure [last July].
“It could mean travel businesses will be required to pay more to accept cards.”
Gary Lewis, chief executive of The Travel Network Group, said: “It’s a cost you can’t carry when businesses are making 3% net profit.”
He warned the new payment rules would mean a “fundamental change” to agents’ business model.
“Agents need to make a decision,” he said. “They aren’t in a position to raise prices. Charging an admin or booking fee is going to be the most they can do.”
Government guidance for retailers is expected in September.
Get your data ready in time for GDPR
Industry lawyers are urging travel businesses to prepare now for the General Data Protection Regulation (GDPR), which will come into force on May 25 next year.
Travlaw partner Farina Azam said: “Now is the time to look at your data, to make sure everything is compliant, so when May hits you’re ready.”
Abta legal affairs director Simon Bunce said: “Don’t put it off until April. The longer you give yourself to do this, the easier it will be. There will be massively increased awareness about this next May – people will be much more aware of their rights to control data.”
The Travel Network Group chief executive Gary Lewis said: “It’s important to go through the process [especially] where you’re doing direct marketing and [using] third parties. But it’s straightforward to comply.”
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Travel faces £150 million cost of ban on credit and debit card charges
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