Brussels, 18/12/2014 (Agence Europe) - On Wednesday 17 December, representatives of the Council of the EU and the European Parliament reached agreement in principle on a draft regulation restricting multilateral interchange fees (MIFs) for debit and credit cards.
For cross-border debit card payments, the agreed cap is 0.2% of the transaction value. For domestic transactions, member states can apply the cap of 0.2%to the annual weighted average transaction value of all domestic transactions within the card scheme. Parliament's negotiators made sure that the system (wanted by the Council) of applying the cap on a weighted average basis will apply for five years only, starting from when the regulation comes into force six months after the legislation is adopted. Emphasising the stance it decided upon in February (see EUROPE 11023), the EP was able to win that after this five-year period, interchange fees for domestic transactions will be subject to a simpler, more transparent regime where the cap for a domestic transaction is 0.2% of the transaction value, or set at a fixed fee of at most five cents per transaction.
MEPs headed by Pablo Zalba (EPP, Spain) and the Italian Presidency of the Council were easily able to reach agreement on credit card payments that caps MIFs at 0.3% of the transaction value, which was exactly the same level as set in the initial negotiating stance.
The negotiators also agreed that the new rules should not apply to so-called three-party card schemes such as Diners and American Express (involving only one bank) provided the card is both issued and processed within the same scheme. Commercial cards used only for business expenses would also be exempt from the new rules.
Financial Services Commissioner Jonathan Hill said: “Thanks to the adoption of this Regulation we have taken a big step towards a Single Market in card payments… that will cut the cost of payments substantially for merchants, especially SMEs and that in turn should lead to a fall in consumer prices. And it offers banks a stable and sustainable business.”
MIFs are paid by a trader's bank to the payment card holder's bank (the bank of the card used for the transaction). Some EU member states allow MIFs of varying rates (up to 1.5%), while others ban them. According to the European Commission and consumer organisation and trading companies, the fees generate excessive levels of revenue for Mastercard and Visa that are then passed on and paid by consumers via higher prices for purchased goods.
User satisfaction. The European consumer bureau (BEUC) welcomed the agreement for putting an end to bank practices to provide consumers with cards on which the highest MIFs are charged and hold bank competitive innovation in the payment sector. The HOTREC organisation of hotel and catering companies at European level described the agreement as a win-win result both for consumers and for businesses. (MB)