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EU leaders agree deal to cap payment card fees


EU law makers have reached agreement on a new regulation to cap interchange fees, charges which are applied to the processing of debit and credit card transactions.

The agreement, which has still to be formally endorsed by the European Parliament and Council of Ministers, relates primarily to interchange fees levied on cross-border credit and debit card transactions, although it will influence the fees applied on corresponding domestic payment card transactions in future.

"For cross-border debit card transactions the agreed cap is 0.2% of the transaction value," a statement issued by the European Parliament said. "For domestic transactions, member states can apply the cap of 0.2%to the annual weighted average transaction value of all domestic transactions within the card scheme."

"Parliament's negotiators made sure that the system of applying the cap on a weighted average basis will apply for five years only. Thereafter, interchange fees for domestic transactions will be subject to a simpler, more transparent regime where the cap for a domestic transaction is 0.2% of the transaction value, or set at a fixed fee of at most five cents per transaction. For credit card transactions, the parties agreed to cap the fee at 0.3% of the transaction value. These caps will take effect six months after the legislation enter into force," it said.

The agreement follows a ruling by the Court of Justice of the European Union in September which said that the level of fees charged by credit card provider MasterCard to cover the cost of processing card payments had had "restrictive effects on competition" in breach of EU rules.

The Court’s judgment confirmed the European Commission’s 2007 decision that multilateral interchange fees set by MasterCard effectively set a price floor on transaction costs in a way that was not "objectively necessary". The Commission's decision had earlier been upheld by the EU's General Court in 2012.

In addition to capping fees and increasing transparency, the Commission said the new regulation “removes major obstacles to technological innovation”. The Commission said: “Technologies allowing online, mobile and person-to-person transactions on the basis of card payments are readily available. However, uncertainty on permissible interchange fees and business rules has so far held up its roll out to EU consumers.”

EU competition commissioner Margrethe Vestager claimed that interchange fees are a form of tax levied on retailers by banks and said that the new legislation would reduce those costs and "lead to lower prices and visibility of costs for consumers". The Commission said the regulation would enter into force after it has been formally approved by the European Parliament and Council, which is expected in early 2015.

Law makers in the UK paved the way for acceptance of the regulation earlier this month when the House of Commons European Scrutiny Committee cleared a proposed EU payments legislative package from scrutiny (106-page / 1.31 MB PDF). The committee said it welcomed the cap on fees as “cross-border electronic payments are becoming increasingly common for individuals and businesses alike”.

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