Credit firms lay their cards on the table

Date: 27/03/1997

By Chris Johnstone and Leyla Linton

EUROPE'S biggest credit card companies have warned they will take their case to the European Court of Justice if the Commission presses ahead with moves to allow shops to charge a fee for handling plastic.

Europay International, which is responsible for Eurocheques, Eurocards and Mastercards, has warned that European Commission attempts to soften the impact of such a major change are not enough and it will go to the ECJ if the current no-charge regime is challenged. Rival Visa says it is working “very closely” with Europay on the issue.

Competition officials have informally warned both companies that existing rules preventing retailers from charging a fee for handling cards should be dropped.

But officials are marshalling their arguments and still talking to the card firms before deciding whether to launch a formal assault on the system in the form of a statement of objections. A decision is expected by the end of April.

Commission officials say they could pave the way for the disappearance of the so-called 'non-discrimination regime', which forces retailers to treat credit cards like cash, with accompanying rules setting a ceiling on the fees which could be levied.

That peace offering has been rejected. “That is the least one could expect,” said a Europay spokesman, adding: “We have rebutted the Commission's arguments one by one. The ball is now in their court.”

Credit card companies say they are bound to lose out if shoppers are confronted with charges for using their plastic. They could even find themselves outflanked by big stores which issue their own credit cards with no charges attached.

Commission officials counter by saying card charges have been introduced in the UK and Sweden without any apparent ill effects on the firms. But Visa says this is because few retailers have taken advantage of their freedom to impose extra charges.

Meanwhile, Europe's banking lobby has described a Commission proposal to create a Europe-wide formula for calculating the annual percentage rate of charge (APR) for credit as “ridiculous”, just weeks before consumer ministers are expected to approve the plan on 10 April.

The European Banking Federation says the directive is flawed because while the formula may be harmonised, there has been no standardisation of all the elements contributing to the charge, making a true comparison of consumer credit impossible.

It warns that the directive would impose additional costs on European banks and would be of no benefit to customers.

“We do not like this directive at all. At first sight it follows the logic of the internal market, but the elements for the APR have not been harmonised. We are not opposed to harmonisation, but if you are going to do it, do it right. Quite frankly, this directive does not serve the consumer,” said a spokesman for the organisation.