Ryanair ready for the fight to keep ‘excessive’ card charges

CONSUMER groups have welcomed the Treasury’s decision to stamp out “excessive” charges for the use of credit and debit cards – but budget airline Ryanair has hit back at the move, claiming it will be allowed to retain its fees.

The decision will see all large credit and debit card charges banned by the end of 2012 in all areas of retail.

Firms will be allowed to add just a small charge to cover their actual costs – which in many cases is pence, rather than running to pounds. Card transaction fees passed on by banks range between 2 per cent and 6 per cent.

Discount airlines such as Ryanair and easyJet have previously been regarded as the worst culprits, charging up to £6 per passenger for each leg of the journey for the privilege of paying for flights online.

The Office of Fair Trading (OFT) has estimated that British consumers spent £300 million on such fees in 2009 – with the vast majority of that believed to have come from the airline industry.

But Ryanair has insisted its charges are “administration” based, rather than linked to credit and debit card charges imposed by banks, and claimed that passengers could still get around the charges by using a different card.

Stephen McNamara, spokesman for the budget airline, told The Scotsman: “We don’t have any charges in relation to credit and debit card processing. The charge that we incur in relation to processing these payments is not passed on to the passenger. We do, however, have an admin fee in relation to the upkeep and development of our 20 websites, 11 of which are in foreign languages.”

He pointed to the Treasury’s comments yesterday that the DVLA’s £2.50 credit card charge for anyone renewing their tax disc would be allowed to remain as it “covers costs”.

“We are one step ahead of the DVLA as we don’t even have a credit card transaction charge,” he said, adding that the airline allowed some customers to avoid the charge by using Ryanair’s own prepaid Mastercard, the Ryanair Cash passport.

But consumer group Which?, which has previously singled out airlines for excessive charges and submitted a “super-complaint”, backed by thousands of supporters, to the OFT earlier this year to have them banned – said the claims would be dismissed by the government.

“The only time the airline charges that £6 admin fee is when a passenger presents a payment method to the airline,” said executive director, Richard Lloyd.

“The principle of this government legislation is about those charges that are practically unavoidable. You cannot avoid paying for a flight so you cannot avoid the charge.”

He added: “The government’s decision to ban ‘rip-off’ debit and credit card surcharges is a huge victory for consumers.

“Given that airline passengers alone pay more than £265,000 a day in card surcharges, businesses shouldn’t drag their feet over this. While the law will come into force at the end of 2012, we want companies to be upfront and fair over card charges today.”

Kevin Mountford, head of banking at MoneySupermarket.com added: “On the face of it, this is great news for consumers and it is great to see the government taking action to protect the average man on the street.

“To date, a number of transactions, particularly online, have attracted extortionate fees that are inappropriately classed as booking or card related charges. Whilst most people will accept that there is a need to pass on legitimate charges, it is clear that some airlines or ticket booking agencies are profiteering from this.”

But he warned that some businesses could find their bottom line under pressure as a result of the move.

“This decision by the government will impact the retailers’ profit margins, however this will provide greater transparency and stop certain companies hiding behind artificial card transaction costs,” added Mr Mountford.

Iain McMillan, director of CBI Scotland, warned that companies could find other ways to recoup the costs. “What the government appears to be doing is to be bringing in new rules which will make the credit card charges more transparent and that is in the consumer interest,” he said.

“It should help to stimulate competition. However, whether in the long run it will cut the cost for consumers is still open to question. The companies which recover the credit and debit card charges will still need to do that and it is quite expensive so there’s an issue that retailers and others will need to deal with.

“It could result in these costs being recovered in other ways.”