Brussels, 24/07/2013 (Agence Europe) - The European Commission has unveiled a package of rules to adjust EU rules to the current trend of making online payments, which will cut the hidden costs of such payments to consumers.
Unveiling the draft legislation on Wednesday 24 July, EU Internal Market Commissioner Michel Barnier said the European Commission was responding to three challenges - providing more protection for consumers by expanding the scope of EU rules to cover new e-payment operators; - cutting costs for consumers and increasing transparency over fees; - and boosting legal security to encourage greater competition on the market, a market worth nearly €2 trillion a year, thus boosting the single euro payments area (SEPA).
The card payment market is currently dominated by MasterCard and Visa, which account for 90% of transactions, followed by American Express and Diners. The electronic payments market has seen the arrival of new players like Sofort in Germany or IDeal in the Netherlands. To ensure fair competition, the EU payments directive (dating back to 2007) had to be adjusted to cover new payment trends. Foreign transactions to or from Europe, like the transfer of cash between individuals using networks like Western Union, will also be covered by the new EU rules.
In the light of the explosion of payments using smartphones and iPhones, their exclusion from the rules will be reduced because the new EU directive will apply to all smartphone payments of above €50 or a monthly total of €250.
The Commission hopes the new rules will reduce the costs that are borne at the end of the day by consumers. Traders will no longer be allowed to charge for using a payment card for an online purchase (as is done for airline tickets) when multinational interchange fees (MIFs) are banned. MIFs currently cover 95% of transactions. The scrapping of MIFs has already been done in 13 member states, leading to a potential annual saving of €730 million. Consumers will have greater protection against fraud and technical trouble and will no longer have to pay any more than €50 if their card is used for an unauthorised transaction (this is three times less than the current cap). Consumers will have the unconditional right to be reimbursed for payments in dispute, unless the service that has been paid for has already been consumed, explained Barnier (if a downloaded film has been watched, for example).
MIFs. Multinational interchange fees (MIFs) are paid by the trader's bank to the bank of the holder of the payment card used for the transaction. Some countries ban MIFs, while others allow them (at varying rates). The Commission says they generate too much income for MasterCard and Visa and, at the end of the day, get paid by the consumer in higher purchase prices.
The Commission suggests an upper limit of 0.2% on MIFs for debit card payments and 0.3% for credit card payments. These upper limits would initially only apply to cross-border payments, but at a later date, they would also apply to national payments. Competition Commissioner Joaquin Almunia said he accepted the argument that some of the related costs must be taken into account, but pointed out that higher prices are paid by all consumers, even those who pay in cash. The European Commission says the measure will lead to an annual saving of nearly €6 billion.
SEPA. The Commission says it is planning to change the way the single euro payments area is organised, where payments by bank transfers and direct debt will be covered by new rules in 2014, despite delays in migration. A European official said the Commission wanted to boost the role of the SEPA Council, aware of the lack of weight of consumer watchdogs at present. He said the Commission and European Central Bank would draw up a memorandum of understanding on the SEPA Council's role.
It will be a tall order to get the draft legislation onto the statute books under the present European Commission and European Parliament. Barnier said that inter-institutional agreement in principle was possible under the current European Parliament because MEPs want speedy progress, although it would not be easy. He said the new legislation was connected with draft rules unveiled in the spring on access to basic bank account services and bank charges. (MB/transl.fl)