Prohibition of Card Fees comes into force at New Year
On 1 January 2018, new regulation of payees' right to charge card fee comes into force. The rules that apply to both traders and consumers are significantly more restrictive and complicated than the present rules and will result in a total prohibition of charge of card fees for a number of the most commonly used payment cards in Denmark.
On 1 January 2018, the Danish Payment Services and Electronic Money Act, implementing EU's second payment services directive, comes into force. In this connection, a basic amendment of the applicable rules for when a payee (e.g. shop, web-shop, telecommunications company or utility company) is allowed to charge a fee (card fee) from a payer (typically a customer) for the use of a payment instrument (typically a payment card), will come into force.
According to the applicable Danish Payment Services Act, a payee is entitled to charge a card fee as long as the fee does not exceed the payee's own costs related to carry through the payment transaction in question. As the costs must be transaction specific (arising from the actual payment), the payee's own costs will typically be limited to the acquiring fee, paid by the payee to its card acquirer.
Exemption to the above applies in connection with the use of certain payment cards (in practice, Dankort) in the physical trade where a prohibition of card fees in reality exists, as the cost structure for Dankort does not allow a transaction specific acquiring fee.
Adjustment in connection with the Danish Payment Services and Electronic Money Act
Payment instruments and card-based payment transactions
Both the rules of the Danish Payment Services Ac and the rules of the Danish Payment Services and Electronic Money Act apply when payment is made using a "payment instrument". Thus, they do not apply, if payment e.g. is made using Betalingsservice (Danish payment service) or using FIKort (electronic payment card).
A payment card is a typical example of a "payment instrument", but as soon as you go beyond the concept's main scope, it will quickly become quite unclear if a given payment procedure constitutes a "payment instrument" or not. This is especially the case with innovative app-/web-based payment solutions, where it e.g. can make a big difference if a payment solution is based on payment via the user's payment card or a direct transfer from one account to another.
It is therefore important always to consider carefully if the relevant payment procedure constitutes a "payment instrument" or not, and with the Danish Payment Services and Electronic Money Act coming into force, it is even more important to asses if a "payment instrument" is "card-based" or not, the way this concept is defined in the interchange fee regulation ("IBGF").
Other payment instruments than payment card
For other types of payment instruments than payment card - e.g. certain types of web-/app-based payment solutions not based on the card infrastructure - the Danish Payment Services and Electronic Money Act continues the applicable adjustment. This means that the payee legally can surcharge its transaction specific costs on the payer in the form of a card fee if the general legislation regarding agreements and marketing otherwise allows this (see further below regarding general rules for charging fees).
Card-based payment transactions
For "card-based payment transactions", the judicial status regarding card fees will, however, become significantly more complicated when the Danish Payment Services and Electronic Money Act comes into force on 1 January 2018. This is due to the fact that the future judicial status will depend on whether the interchange fee associated with the card in question is subject to Chapter II in IBGF setting limits to interchange fees on certain types of card-based payment transactions.
Chapter II in the IBGF presupposes that (i) both the card issuer and the acquirer are residents in the EU, (ii) the card scheme is a "four-party scheme" (e.g. Dankort, Visa, Mastercard and UnionPay) or a "three-party scheme" using partners, licensees or similar for card issuance and/or acquirement, and (iii) the card is not a company card.
The rules for "card-based payment transactions" (which do not include e.g. Betalingsservice or FIKort) can thus be summarised as follows:
Is it legal to charge card fees?
As can be seen, the assessment of whether a payee may legally charge card fees will become significantly more complicated after 1 January 2018. Where, in principle, there have only been payees in the physical trade so far who have been in need of distinguishing between Dankort and other cards, it will in future be necessary for all payees wishing to make use of the options of charging card fees to organise their systems in a way that they can distinguish between at least:
- Company cards and other cards;
- Dankort and other cards;
- "four-party scheme" cards and "three-party scheme" cards;
- Whether the issuer or acquirer of a "four-party scheme" card is resident outside the EU;
- Whether a "three-party scheme" makes use of the partners or licensees for issuance or acquirement.
Moreover, if the relevant payee also wants to be able to receive innovative app-/web-based payment solutions, a correct charge of card fees requires that an analysis has been completed beforehand of whether the payment solution in question constitutes a "payment instrument" and perhaps is "card-based".
Finally, as a payee, you must remember that even if you can legally charge a card fee according to these rules, the fee must be cost-based and transaction specific. As an absolute main rule, a card fee can therefore not be charged which is higher than the size of the transaction specific acquiring fee that the payee itself has to pay to the acquirer.
General rules concerning charge of fees
When charging fees, the payee must - regardless of the payment legislation as described above - comply with the contractual and marketing rules in any circumstances. This means first and foremost that the fee must be validly agreed between the customer and the payee.
If the payee in a contractual relationship with a consumer wishes to introduce a fee or increase an existing fee (provided that it complies with the rules in e.g. the Danish Payment Services and Electronic Money Act), the conditions for this must be clearly stated in the contract. This means, among other things, that change of fees without customer's acceptance requires that:
- The agreement does not give the payee unlimited options for amending the agreement;
- The criteria for the occurrence of such amendments are clearly stated;
- The customer will be notified of the change individually within reasonable time before it becomes effective; and
- The customer may terminate the agreement as a result of the change.
Finally, the fee must not be unreasonably high which may be relevant for payment fees not covered by the Danish Payment Services and Electronic Money Act as e.g. fees for payment via Betalingsservice or FIKort.
According to the practice of the Consumer Ombudsman, a maximum fee of DKK 50 may be charged for bills not being registered with Betalingsservice. Furthermore, a fee may only be called a "PBS fee" or "Nets fee" if the fee corresponds to the cost paid by the trader to Nets as it otherwise could be misleading information. The same applies when using the term "Payment via Betalingsservice".