As part of the broader EU reform of consumer protection, the UK has implemented a number of legislative changes substantially strengthening consumer rights. One of those changes is enshrined in the Consumer Rights (Payment Surcharges) Regulations 2012, which came into force on 6 April 2013 and directly impact art market professionals accepting payment by card.
The Regulations prohibit traders from charging consumers fees that exceed the cost borne by the trader for the use of a given means of payment. In other words, any fees charged by a trader – including auction houses, galleries and dealers – for using a specific method of payment (e.g. credit or debit cards) must reflect the genuine costs they incur for using that method of payment.
The excessive surcharge prohibition is designed to prevent traders from using such fees to generate profit or margin. It applies to all methods of sale, including on-premises, off‑premises, distance and online contracts. However, it only applies to contracts concluded with “consumers”, i.e. persons who enter into the relevant contract for purposes that are not in their business, trade or profession. Business-to-business contracts, such as contracts between auctions houses and dealers, are not subject to the prohibition.
According to the Department for Business, Innovation and Skills, the trader may recover the direct costs incurred that can be exclusively attributed to a specific method of payment. For example, for card payments, these costs could include (amongst others) the Merchant Service Charge paid by the trader and the costs of running the card terminal. Any other administrative and processing fees can be levied as long as they represent an actual direct cost (our emphasis) incurred for processing payment by that particular payment method. Indirect costs, such as overheads and staff training, are not, in principle, recoverable.
Traders are required to identify on the invoice the specific cost attributable to the specific type of payment. This cost can either be charged on a “per transaction” basis or as an aggregate fee averaged out for all transactions using a particular method of payment. A single fee for a given category of payments (such as credit cards) to be allocated to each transaction on an averaged basis is therefore allowed. For instance, a single blended rate for credit card payments for a combined group of card schemes (e.g. Visa/MasterCard), is permitted.
Micro-businesses (fewer than 10 employees) and start-up companies, which were temporarily relieved from the obligation to comply with the Regulations, are required to comply as from 13 June 2014.
Any charge in violation of the prohibition will render the obligation to pay the charge unenforceable. If the consumer has paid the charge, he/she will be entitled to recover it through private action. If harm is suffered collectively by a group of consumers, enforcement action can be taken against the trader by a number of authorities, including the Competition and Markets Authority and trading standards officers.