Surcharge rules for consumer and business transactions

Surcharge rules for consumer and business transactions

The Department for Business, Energy & Industrial Strategy (BEIS) has updated its guidance on the Consumer Rights (Payment Surcharges) Regulations 2012 due to changes made to them by the Payment Services Regulations 2017. The amendments take effect from 13 January 2018.

SME’s dealing with consumers

For most retail payments, the Regulations ban traders from imposing any surcharge in addition to the advertised price of a transaction, for using the following methods of payment: consumer credit cards, debit cards, not card-based payment i.e. mobile phone-based based payments or electronic payments such as PayPal. 

The ban applies to all payments made as mentioned above and covers not only goods and services, but also taxes (i.e. HMRC, DVLA). However, they do not include corporate cards issued to employees for business expenditures such as office equipment and supplies or services.

The Regulations apply to contracts no matter how they are concluded, including on business premises or away from a business premises or at a distance.  The ban will apply when the payment service providers of both the merchant and the consumer are located within the EEA.

Of interest is that traders are allowed to charge other fees for example delivery fees, booking fees and administrative fees, on condition that these are the same irrespective of the payment method. Businesses must quote the price of a product (i.e. goods, services or digital content), inclusive of any non-optional surcharges wherever it appears and in any event, before the consumer takes any action towards making a purchase.

The guidance confirms that the original ban on excessive surcharges on consumer payments contained in the Consumer Rights Directive, remains in place and may still be relevant where the new bans do not apply.

What about other methods of payment?

Traders are allowed to make a charge for other retail payments (for example cash, direct debit, standing order or cheque) but if a surcharge is imposed for using a specific method of payment, then it must not be more than the direct cost borne by the trader for use of the relevant means of payment. So the cost should mirror the actual cost to the business for processing the payment.

Traders must be transparent about surcharges and must point out these costs up front. 


The restriction on the amount of a payment surcharge for other methods of payment does not apply in certain excluded contracts. For example:

  • Contracts for contracts for the supply of foodstuffs, beverages or other goods intended for current consumption in the household that are supplied by a trader on frequent and regular rounds to the consumer's home, residence or workplace
  • Contracts concluded by means of automatic vending machines or automated commercial premises
  • Rental of accommodation for residential purposes
  • Contracts for gambling within the meaning of the Gambling Act 2005
  • Contracts for services of a banking, credit, insurance, personal pension, investment or payment nature
  • Contracts for the construction of new buildings or the construction of substantially new buildings by the conversion of existing buildings.

Business-to-business transactions

For most payments between businesses made with commercial payment instruments, the Regulations ban traders charging customers more than the direct cost borne by them for use of the relevant means of payment. For the ban to apply the payment service provider of at least one party to the transaction must be located within the EEA.

A payment instrument is a personalised device or personalised set of procedures agreed between the payment service user and the payment service provider which are used by the payment service user in order to initiate a payment order.

Options to deal with the increased costs

The guidance suggests that traders may choose to:

  • Absorb the costs;
  • Stop accepting a certain payment method;
  • Increase the headline price of goods or services;
  • To negotiate lower fees with their payment service provider.

What if a trader ignores the Regulations?

Customers will be entitled to receive a refund of any unlawful surcharge they have paid and may take legal action to recover any surcharge, where needed. Quite separately, consumer enforcement authorities (such as local authority trading standards) have the power to take civil enforcement action against traders who breach the rules. The maximum penalty is a fine and two years’ imprisonment.

Details can be found here

As always, if you have a legal query please get in touch with the FSB Legal Helpline on 0345 0727727 and we'll be happy to assist you.