Credit card fee changes: The hidden impact on small businesses & consumers

Press release

Companies will no longer be able to charge fees for using credit cards, following the implementation of a new EU directive.

credit card twiddlytwaddlytwoo.co.uk

Since April 2013 traders have not been able to charge consumers fees that exceed the cost for using a particular method of payment. However, from 13 January 2018 companies will no longer be able to charge any fees for the use of credit or debit cards. This includes payment methods such as Apple Pay and PayPal, too. The change also applies to Government departments and local councils. So, for example, DVLA will no longer charge you a fee for paying by credit card when you renew your road tax.

(Be aware though, that although the Law covers the EU and therefore there should be no charges for credit card payments anywhere within it, the UK Government extended it to Paypal etc. So if using PayPal or similar then you will need to check with the country as to whether they also applied this extension.

Is this good news for consumers? Helen Dewdney, The Complaining Cow and author of How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results! thinks so. (That’s me that is).

She asks “Who isn’t annoyed when they have to pay a fee for paying for their car tax or to Ryanair for booking their flight?” Dewdney is emphatic that traders have had long enough to know this change has been coming to be able to plan and not pass increases in costs to consumers. “That goes for those Government departments, too, so there should certainly not be an increase in council tax fees and road tax to cover the supposed ‘loss’, thank you very much!”

She adds “Used wisely, many people pay by credit cards to defer payment and also to get cashback rewards!”

Scrapping the credit card payment charge on picture of card reader

However, not everyone welcomes the changes. David Taylor, who blogs at Thinking Thrifty and runs a café, fears that with no charge it’ll encourage card payments even further for really small amounts. He is considering not taking credit card payments any more, admitting that he will lose some custom “but if that custom is making me a loss, ironically, I can’t afford the custom anyway.”

The Federation of Small Businesses believes that David is not alone saying “many small firms will struggle to absorb the costs associated with card payments”.

Not all small businesses agree though:

Richard Allen of Reflections Detailing – a car restorer – has never charged a fee for using credit cards. He says “It’s just a cost of doing business and in the grand scheme of things, it’s a pretty small cost. I didn’t know it was coming though. But actually it costs me more to handle cash in any case!” He notes that credit card transactions incur a fee of 2.389%, debit card transactions 0.495% and cash 2%. Every card transaction also has a 5p authorisation fee. No company ever charged for handling cash!”

Then there’s places like Just Each which had a 50p credit card  charge. They have had to scrap that and have introduced a 50p service charge for all transactions. Keep and eye out for those and come back here and tell us so we can have a rogue’s gallery!

The Taxman cometh
The HMRC has received criticism for abolishing credit card payments. A spokesperson for the HMRC said “We will no longer be accepting personal credit card payments from 13 January as new rules mean that we can no longer pass on what our bank charge for processing a credit card payment. It would be unfair to expect other taxpayers to pick up this cost. There are a range of ways for people to pay us depending on the type of tax being paid, including debit cards, Direct Debit, Faster Payment and BACS.”

Dewdney believes that people should put money aside as they earn it to pay their tax. “However”, she argues, “for some people less able to plan financially, or who suddenly find themselves in a difficult financial situation, the short notice (announced a few weeks before Christmas and nowhere on the HMRC website) will be very unhelpful.”

If you are struggling to pay your tax see Debt Camel’s 10 things you should know if you can’t pay your tax bill

Open banking changes
The arguments for and against the banning of charges are only part of the bigger picture. The ban comes in on the same day as the introduction of Open Banking which could potentially bring greater benefits for consumers.

Sara Williams is a Citizen’s Advice advisor and UK Money Blogger of the Year 2017 for Debt Camel, covering debt and credit ratings. She says that large retailers may try to bypass the current payment mechanisms and provide payment apps directly to customers. “Getting rid of charges for using cards will be generally good for consumers.” But she warns consumers to “Look out for side-effects. Card companies may reduce their charges to business and cash back credit cards may disappear as a result.”

Seen a business charging the fee?
Complain! Obviously! Write in the first instance claiming the fee back if you have already paid it. Use the Top 20 Tips for effective complaining. You can also report the company to Trading Standards and let us know about in the comments below too!

How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results!

 

For more information, guidance, advice, tips and templates on complaining effectively GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

25 top finance blogs (saving, making, investing, tips & more)

Although this blog is about consumer rights and how not to get fobbed off, I thought it might be useful to share some good money blogs with you. If you are interested in knowing your rights you may also be interested in finding out about ways to save and make money on a variety of things from holidays to personal finance, food to energy saving and selling stuff! There are of course thousands of blogs out there run by people keen to share their ideas and sometimes you may stumble across them and some that are equally as good that you don’t. So I’ll list some for you all in one place so that if you fancy putting your feet up with a cuppa or glass of wine, here are some good ones to start you off. If you find any of them useful or you’d like them to cover a financial issue that fits with their blog then please do mention it in a comment on their (not mine!) blog.

I have tried to provide a varied list to give lots of choice of what’s out there, so that each one I’m showing you, is for the most part, quite different to another.

Be Clever With Your Cash is a blog about helping you do the same. It picked up Best Personal Finance Blog at this year’s Headlinemoney awards. (I was nominated I’ll have you know, but my blog is pretty niche! “I only do complaining” I often say!) Run by Andy Webb covers all sorts of great stuff.

Skint Dad fed up of being skint and struggling to make ends meet; in 2013 husband and wife team Ricky and Naomi Willis launched the blog to help other people in the same boat. Whether you’re looking to cut back on your food bill, save for a rainy day, or find inventive ways to up your income; Skint Dad has the answer. Masses on here (even a guest post from yours truly hidden away. They won Headline Money award last year and various awards in the UK Money blogger of the year awards.

LottyEarns Charlotte Burns is the current UKMB Blogger of the year,  and her blog focuses on luxury on a budget. It can be done and Charlotte provides many a tip on how.

Skintedmintedmum Charlotte and Minted mum Jane, both personal finance journalists, offer family finance tips to other mums whatever their budget. That little bit different in concept to other blogs which I like, so well worth a visit.

Thinking Thrifty David blogs about making, managing and saving money. Having recently taken the plunge and invested in his own business instead of the bank, he picked up the best new blog award at The SHOMO Awards 2016

Debt Camel Sara blogs about everything to do with debt and credit ratings. An important aspect of that is better budgeting, aiming for a small emergency fund and reducing your borrowing costs and expenses wherever possible. Sara also write a guest post on my blog Everything you need to know about Payday loans so you know she must be good!

Your Money Sorted Eileen’s blog helps UK based women to make the most of their money, through helping them to improve their money mindset. She’s got some interesting freebie guides on tips and mindset, I’m just signing up for a couple.

Reduced Grub shows people that you don’t need a huge budget to eat decent food. Lots of ideas for cheap tasty meals by Kelly here.

Mrs Mummypenny Lynn blogs about healthy wealth, body and mind. A personal journey with lots of tips etc. you may take some inspiration.

Katy Kicker Katy blogs about money saving as a parent, allotment owner and person committed to random acts of kindness. Find money saving advice on a whole host of subjects.

Savvy in Somerset Fiona writes mostly about money saving but other personal finance bits and she comes from Somerset too! (All the best people do 😉 Oh and Fiona? 8 tests I took. 8!

Money Saver Moneymaker Jenny writes a blog that encourages women to make money from home, with a focus on turning hobbies into business. Like me not able to resist a bargain and she shares her money saving finds, leaving you with more money all round to spend.

The Diary of a Frugal Family is all about Cass and her family’s journey to living a more frugal lifestyle having as much fun as possible along the way. You’ll find everything from money to meal planning and from Teen DIYs to Travel posts and you’ll find a free budget planner.

From Pennies to Pounds  Francesca writes about how to save  and earn money from home to pay off debt and achieve your financial goals. Different to the many blogs like this as Francesca is newly married with a daughter and is at uni so may appeal to students out there!

The Frugal Cottage Nicola blogs about budgeting, money saving and early retirement and won the People’s Choice Award last year at the SHOMOs.

Money Tree Man with the help of his Money Tree girlfriend writes a blog about saving money to achieve financial independence, starting with buying a house! Investments etc. Whilst that may be a little different to other blogs which talk about tips, saving money etc. etc., anyone that writes “Rants and bants”, “A quick google can be the difference investment ingenuity of fiscal fucktardedry!” and “Little bitch syndrome” has got to be worth a peruse.

Much More With Less Faith is a personal finance journalist who writes about moving to the country, living on less and making the most of it. Posts focus on food, finance, family, flowers and fitness, all with a frugal spin.

Pounds and Sense Nick blogs about making money, saving money and investing money, aimed especially (though not exclusively) at over sixties

A few more on saving and making money: Time and Pence, Money Saving Girl, Emma Drew,   Thrifty Mum,  I Beat Debt  and Homely Economics

Not really a blog but is a site that supplies links to individual bargain items Latest Deals UK

and one of my long standing Twitter buddies who I’ve been following for yonks. Ok different to all the other finance blogs listed but it IS finance and I want to include him so there!

So a special no 26:

Banker’s Umbrella blog on private banking and wealth management

And if you’ve come here via someone tweeting this page – you can find out About Me and you can GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS! for tips, information advice, guidance, consumer rights/laws and template letters and you can find that all over the blog as well.

 

Everything you need to know about Payday loans

In the first six month of 2016, complaints to the Financial Ombudsman about payday loans more than tripled to 4,186 compared to the previous six months. The Financial Ombudsman has said this is because borrowers have become more aware of their rights.

Debt camel guest post on The Complaining Cow

 

I don’t think many people understand their rights in this area, so I asked Sara Williams, who runs the Debt Camel advice website and who is also a Citizens Advice advisor, to explain what these complaints were about and what to do about them!

What is a payday loan?
A payday loan is very short term loan at a high rate of interest. A typical example is if you borrow £200 to be repaid the next time you are paid – hence the name “payday loans”. The interest rates on these loans can often be over 1,000% APR.  Sometimes the repayments can be spread over a few months.

The regulator says loans should be “affordable”
You might think that at those interest rates the loans obviously aren’t affordable, but the regulator’s definition looks at whether someone can afford to repay the loan without experiencing adverse consequences.

In other words, affordable credit can be repaid on time and still leave you able to pay all your bills and cover your normal household expenditure. If the only way you could repay a payday loan is by borrowing again, perhaps from the same lender, or by getting into more debt with another lender, or not paying the rent or a utility bills, that payday loan was not affordable.

These affordability rules have applied for a long while. The Financial Conduct Authority (FCA) introduced tighter rules for payday lending since 2014, including capping the interest, but the previous regulator, the Office of Fair Trading, had very similar rules on affordability.

In 2014 the FCA made Wonga give refunds and loan write-offs to many customers. This was the first time there was any publicity for the concept of affordability and payday lending.

The principle of affordability isn’t a special rule for payday loans. It applies to all lending, from bank loans to credit cards. But it tends to be easier to show a payday loan is unaffordable because the repayment amounts are so large, having to repay the full loan immediately, not just a small proportion each month.

Repeat borrowing is likely to be “unaffordable”
A lender can check for affordability in various ways, such as looking at your credit record and asking about your income and expenditure. But they should also take into account how much you have previously borrowed from them.

Payday loans are meant to be used when you have a temporary difficulty. If the lender can see that you have been repaying their loan and then borrowing again (or you kept extending the term by “rolling” the loan) for month after month then this doesn’t sound like a short term problem.

In this sort of situation that the Financial Ombudsman is often deciding that the lending was unaffordable and that the lender should have realised this after the first few loans. In a typical decision, the Ombudsman says that the interest paid on the unaffordable loans should be refunded, 8% statutory interest should be added and the loans should be deleted from your credit record.

How to complain
If you have borrowed from a payday lender and you think your loans were unaffordable, you should think about complaining to the lender.

Email is the best way to do this, so you have a record of what you have said and a date-stamp on it. I have published a list of emails to use for complaints to payday lenders.

Your complaint needs to tell your story, explaining why you feel the loans were unaffordable for you, and ask for a refund of interest paid. This doesn’t need to be complicated, you don’t need to quote laws or calculate the amount of a refund. If you would like to see an example template letter, there is one on my How to ask for a payday loan refund page.

Follow the Tips for complaining.

At the bottom of that page there are a lot of comments from people making these sorts of affordability complaints. It’s a good place to look if you want to get a feel for what sort of reply you may get from the lender and how long it might take.

If the lender says No or doesn’t reply
If you get a rejection from the lender, or you are offered an amount of money which seems very low compared to the amount of interest you paid, then have a think about your case.  If you just had one or two loans from the lender and you repaid them on time, it probably isn’t worth taking this any further.

But if you feel that you were caught in “the payday loan trap”, having to keep borrowing every month, or if you told the lender you were in difficulty and they ignored this, then take your case to the Financial Ombudsman. Also do this if you don’t get a reply within eight weeks – that is the time the Ombudsman says you have to allow the lender to resolve your complaint.

It’s easy to put in a complaint to the Financial Ombudsman – you can do it online or over the phone.  The process isn’t speedy, it will usually take a few weeks for someone called an adjudicator to start looking at your complaint. It can take several months if the payday lender is slow about replying to questions from the adjudicator. Most complaints are settled by the adjudicator, with both sides agreeing, but some go to the second stage where they are looked at by an Ombudsman.

The Financial Ombudsman publishes anonymous details of some complaints which you can look up if you would like to see more about the cases that are being considered.

Payday lender regulation has improved
After the FCA became the regulator for payday lenders, it introduced important protections:

  • from July 2014, lenders were not allowed to “roll” a loan more than twice;
  • new restrictions on their ability to take money directly from someone bank account via Continuous Payment Authorities; and
  • from January 2015, the cost of payday loans was capped at a maximum of 0.8% per day and a total cost cap of 100% to protect borrowers from escalating debts.

These measures have removed many of the worst excesses of the payday loan market in Britain. They have also had the desirable side effect of making some of the least scrupulous lenders decide to exit the market.

But although standards have improved a lot, the Citizens Advice report Payday loans after the cap – Are consumers getting a better deal? in August 2016 found that many payday lenders are still not conducting proper affordability checks. And borrowers who didn’t have an affordability check were nearly twice as likely to have trouble repaying their loan as those who remembered being asked about their ability to repay.

Adequate affordability checks are an essential safeguard for borrowers. It is good that the Financial Ombudsman is recognising this and giving redress to people who were caught in the payday loan trap.

For advice, guidance, tips, consumer rights and laws on other areas for consumer  GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!