Download FCA - The UK Cards Association

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FCA Call for Input: Terms and definitions for services
which are linked to payment accounts and subject to fees
Response from The UK Cards Association
16 July 2015
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Author:
Richard Koch
Head of Policy
The UK Cards Association (UK Cards) is the trade body for the card payments
industry in the UK, representing financial institutions which act as card issuers and
acquirers. Members of the Association account for the vast majority of debit and
credit cards in the UK, issuing in excess of 56 million credit cards and 95 million debit
cards - and cover the whole of the payment card acquiring market.
The Association promotes co-operation between industry participants in order to
progress non-competitive matters of mutual interest; develops industry best practice;
safeguards the integrity of the card payments industry by tackling card fraud;
develops industry standards; and co-ordinates industry-wide initiatives aiming to
deliver innovation. The Association is committed to delivering improved outcomes for
the customer and seeks to inform and engage with stakeholders to advance the
industry for the ultimate benefit of its members’ consumer and retail customers.
Summary
•
We support the aim of the EU Payments Account Directive (PAD) to improve
transparency and comparability of fee information in relation to payment
accounts, and note that a key component of this is the introduction of
standardised definitions to describe various services linked to payment accounts.
•
We note that, for the purpose of the PAD, Article 1(6) applies PAD to payment
accounts where consumers are at least able to place funds, withdraw cash, and
execute and receive payment transactions, including credit transfers, to and from
a third party. We note that HM Government is minded to limit the application of
PAD to current accounts – or accounts that have functionalities directly
comparable to those of current accounts – in the UK. Credit card accounts will be
specifically exempted. We support this approach.
•
We recognise that the current work being taken by both the FCA and the EBA will
impact how UK current account providers describe the fees applied for using
debit cards to access foreign currency at an ATM, or over a branch counter, or
when paying for goods and services in a foreign currency.
•
We have already achieved a high degree of consistency within the UK on foreign
transactions.
•
We are concerned that EBA initiative may inadvertently undermine previous work
undertaken by The UK Cards Association, OFT and British Banking Association
to deliver this consistency, in response to a consumer super-complaint on using
cards abroad. In particular it might frustrate the ability of consumers to compare
the cost of making transactions with credit cards rather than debit cards. Over
60% of UK citizens have both a credit and debit card and therefore are likely to
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have an interest in comparison of that choice.
Background
•
On 21 September 2011 Consumer Focus lodged a super-complaint with the
Office of Fair Trading (OFT) stating:
o the complex and unclear charges applied when using credit or debit cards
abroad are confusing and may prevent consumers from making well
informed choices;
o the charges applied by some banks and credit card providers for
purchases of foreign currency within the UK are unfair and may restrict
competition and consumer choice;
o the use by some UK foreign currency retailers of phrases promising '0%
commission' and 'competitive exchange rates' may mislead consumers
and prevent them from shopping around.
•
The OFT published its response to this super-complaint in December 2011 1. The
OFT concluded that charges for purchasing foreign currency and using cards
overseas can be confusing and often not clear for consumers.
•
The OFT worked with The UK Cards Association and the British Bankers'
Association to address these concerns. The UK Cards Association was pivotal to
the industry agreement that the OFT secured from card credit and debit card
issuers to improve the information available for consumers using credit and debit
cards abroad. The agreed remedies included:
o A joint agreement from The UK Cards Association and the British Bankers’
Association, on behalf of their members, that they would give clearer, more
accessible information about their charges for using cards abroad,
including on websites, statements and through call centres;
o Agreements from a number of card providers to display the actual charges
incurred by customers for using cards abroad more clearly on their monthly
and annual statements.
•
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In relation to charges for the use of debit and credit cards abroad, the OFT
secured the following:
o Consistent terminology for foreign use charges to be agreed across the
http://webarchive.nationalarchives.gov.uk/20140402142426/http://www.oft.gov.uk/shared_oft/sup
er-complaints/824817/oft1400
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industry.
o Improved presentation of foreign use charges in credit card and (to the
extent they are already provided) personal current account summary
boxes, making it clear where charges are cumulative.
o Changes to call centre processes, so that where the payment card provider
requires or encourages them to do so, customers telephone payment card
providers in advance of travel.
o Improvements to website travel pages, such as accessible links to foreign
use charges, worked examples of how foreign use charges apply, and links
to historic exchange rate information.
o All major payment card providers to break out and show the GBP amount
of the exchange rate fee on monthly statements.
o Annual statements to show the GBP amount of foreign use charges that
have been applied, where these are shown on monthly statements.
•
The OFT reported on the progress of these initiatives in its Review of the
Personal Current Account Market 2 in January 2013. It concluded that significant
progress had been made and that it was satisfied that where commitments had
not yet been delivered, plans were in place. This satisfied the OFT that no further
action was required on their part.
•
Having previously coordinated industry activity aimed at arriving at standard
terminology, we appreciate the complexity of the process the FCA and EBA are
pursuing and why in some instances it might be appropriate to differentiate
between different fees that might apply to particular transactions undertaken in a
foreign currency. Sometimes concurrent fees apply, and the OFT found that this
“layering” of charges was not well understood by consumers. Their remedy was
to require the industry to disaggregate these charges and to display them
separately. The current FCA/EBA initiative may inadvertently drive consolidation
of charges in a way that lessens transparency for customers, clearly a poor
consumer outcome.
•
A copy of the agreed industry terminology is contained in the appendix to this
document. It demonstrates that a number of distinct, cumulative charges can
apply to various transactions, depending on the circumstances in which the
2
http://webarchive.nationalarchives.gov.uk/20140402142426/http://oft.gov.uk/shared_oft/reports/fi
nancial_products/OFT1005rev
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transaction takes place.
Response to questions
Our comments are focused exclusively on terminology associated with debit card
transactions.
1. Do you agree with our approach to defining what constitutes a service?
•
We support the FCA’s view that there are distinct services attaching to debit
cards:
o debit card payments made in sterling
o debit card payments made in currency
o withdrawing sterling in the UK
o withdrawing sterling outside the UK
o withdrawing foreign currency in the UK
o withdrawing foreign currency outside the UK
•
For completeness it should be noted that it is possible to make debit card
payments, denominated in sterling outside the UK. Some retailers offer a
service called Dynamic Currency Conversion (DCC), which provides the
option to have the transaction converted into sterling using an exchange rate
set by the retailer. The value of debit card Overseas Sterling Traction (OSTs)
was £15bn in 2014.
2. Do you agree with our proposed list of most representative services?
• The OFT’s remedies in relation to the Travel Money super-complaint were
aimed at providing consumers with considerably more detail in relation to debit
and credit card transactions, to enable them to make more informed choices.
Pricing structures vary considerably between providers. The requirement was
to ensure that sufficiently detailed fee information was available (prior to travel)
to enable consumers to choose between possible payment methods and, when
detailing charges on statements, to ensure that the charges were transparent.
• We consider that these objectives are still relevant and are adequately
achieved through the current regime. Any move away from the existing
arrangements is likely to frustrate the original objectives of ensuring consistent
terminology is used for both debit and credit cards. Over 60% of the UK
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population have access to a debit and credit card and therefore can exercise
that choice.
• Considerable investment has been made in revising materials, developing
websites, and providing information in various formats including monthly and
annual statements. The agreed common terminology underpins this.
• We note that the EBA guidelines permit competent authorities to exercise
judgment in deciding which services should be included in the list, taking into
account, among other things, specificities of national markets. We consider
that the UK has already developed a robust approach, which would potentially
be disrupted if services related to debit card transactions were included.
• Consequently we advocate their non-inclusion.
3. Do you agree with terms we propose to use to refer to the services on the
provisional list?
• We believe that the complexity of the charging structure relating to debit card
transactions is such that a single term is unlikely to convey all of the
appropriate information required to deliver optimal transparency, and help
consumers make the best choices.
• We advocate maintenance of the existing regime.
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