* Commission outlines rules to cap debit, credit-card fees
* Law would stop airlines imposing credit card surcharge
* Retail lobby says cap too soft, banks critical of move
By John O'Donnell and Foo Yun Chee
BRUSSELS, July 24 Banks will have to limit the
fees they charge on card payments under proposals from the
European Commission on Wednesday that would also scrap
surcharges on shoppers paying with plastic.
The draft law would squeeze an important source of income
for banks but should bring lower prices for consumers.
It will also end the practice of bumping up the cost of
airline tickets, for example, when consumers use their credit
card to pay.
"The interchange fees paid by retailers end up on consumers'
bills," said Joaquin Almunia, the European Union commissioner in
charge of antitrust enforcement, who announced the measures.
"Retailers will make big savings by paying lower fees to
their banks, and consumers will benefit through lower retail
prices," he said. The Commission estimates that the new curbs
could save retailers 6 billion euros ($7.93 billion).
The rules are a setback in particular for Visa Europe, the
European licensee of Visa Inc. that is owned and operated
by roughly 3,000 European banks including all major lenders.
MasterCard will also be affected.
Visa, Mastercard and bank lobby groups disputed that the new
law would benefit consumers.
"Experience indeed shows that merchants do not pass fee
reductions on to consumers," said Sebastien de Brouwer at the
European Banking Federation.
The UK Cards Association, which represents card issuers in
Britain, said they might be forced to introduce new fees to
cover their operating costs.
Visa Inc and MasterCard are defending similar fees in the
United States where retailers claim they have inflated such
Some cards in Europe, such as branded commercial cards
issued, for example, by a retailer will not be covered by the
rules. American Express, which operates on a different basis,
will also be largely unaffected.
At the moment, banks charge a fee when processing payments
using cards that can amount to 1.5 percent of the purchase
Under the draft rules, which the Commission hopes will widen
retailers' acceptance of cards, that charge would be capped at
0.2 percent for debit cards and 0.3 percent on credit cards.
Once the European Parliament and EU countries give their
blessing for the rules to come into force, companies such as
airlines would be unable to impose surcharges, saving consumers
730 million euros ($964.94 million) annually.
If lawmakers in Brussels hammer out final details of the
rules before European Parliament elections next year, an
ambitious goal, the law could be in place in 2015.
The new law would mark the end of a two decades-long battle
between the EU's executive, which enforces antitrust rules in
the 28-country bloc, and card firms Visa Europe and MasterCard.
Visa Europe has already offered to cap inter-bank credit
card fees at the level of 0.3 percent, the same benchmark as
And while consumer lobby group Beuc welcomed the end of what
they called "shameless" surcharges, some retail lobbyists said
the draft rules limiting interbank fees did not go far enough.
Ruth Milligan of EuroCommerce, a retail lobby group that has
campaigned for cuts in the charges, said the fee should reflect
the "tiny" actual costs involved.
"It should be a fixed fee," said Milligan. "There is no
reason for it to be a percentage fee. Because the electronic
system is already in place, it's a tiny cost, something like 1
cent per transaction."
"There has been a political compromise in the Commission
with a lot of pressure from the banking sector and the card
schemes," she said, adding that the levels of the cap had been
chosen without input from merchants or consumers.
The cap, which is in line with measures demanded by the
Commission's antitrust officials, will apply initially for
cross-border transactions - for example, when an Irish
card-holder uses the card in France.
After almost two years, this limit would be extended to the
so-called interchange fees on domestic payments using all cards.