FSB warns credit card fee ban is "double-edge sword" for small businesses

Courtney Goldsmith
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Even small shops will no longer be able to pass credit card fees onto customers (Source: Getty)

The Federation of Small Businesses (FSB) has warned an EU-wide ban on preventing credit card charges from being passed on to customers presents a "double-edge sword" for small businesses and called on policymakers and businesses to work together to bring down the charges.

UK companies will no longer be able to pass on the fees to customers from today. Instead, businesses will have to take on the costs themselves.

“The proportion of small firms reporting a rise in operating costs is now at a five-year high. Removing their freedom to share the burden of card payment fees will give them yet another outgoing to worry about," said FSB chairman Mike Cherry.

Cherry added: “The interchange fees demanded by card companies are only the start of the costs that small firms incur when they process a card payment. They also have to foot the bill for compliance, set-up, authorisation fees and payment system operating costs."

HMRC itself in December said it would stop accepting payments by personal credit cards as a result of the ban, saying: "As a public funded body, HMRC is unable to absorb the cost of personal credit card fees as this would ultimately mean charging the fees back to customers through the public purse. It has been agreed that HMRC is unable to accept personal credit card payments from 13 January 2018."

Cherry said it was "hypocritical" for HMRC to ban personal credit card payments while small firms had to absorb the costs.

“Small businesses don’t want to pass on card fees to their customers, so it’s high time for policymakers and businesses to work together to bring down the charges levied by card providers," he said.

American Express yesterday welcomed the move, saying it would "create a level playing field for consumers and will give them the confidence to use the payment method of their choice".

Scrapping credit card fees for customers is part of the Open Banking overhaul which begins today, in which individuals can allow approved third parties - including finance providers, accountants and price comparison sites - to access their current account transaction details.

Cherry said: “The potential for Open Banking to inject fresh competition into a whole swathe of sectors is huge. As things stand, too many small firms aren’t accessing the banking and finance routes that are right for them. Allowing providers direct access to the information they need to tailor offers and vet applicants could help change that."

Read more: What is Open Banking? Everything you need to know but were afraid to ask

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