EU: Prohibition on payment surcharges starting January 2018


September 20, 2017 Leave a comment
With the adoption of the revised Directive on Payment Services (PSD2), the EU has essentially banned surcharges for using specific payment methods. Currently, national legislators are implementing the regulation. As of January 13, 2018, most provisions stipulating additional fees for payments by bank transfer, direct debit or debit/credit card will be prohibited.

What does this mean?

In the past few years, surcharges for payment methods have come under increased scrutiny. After some restrictions were already imposed in the past, the new approach abolishes these fees almost entirely. The European Commission estimates that the prohibition will cover 95% of all debit and credit card payments in the EU.

The regulation is part of the revised Directive on Payment Services (PSD2), which the Member States are obliged to implement by January 13, 2018. In Germany, the national legislation implementing these changes will take effect on this date. Any agreement obliging debtors to pay a fee for using SEPA direct debit, SEPA credit transfers or payment cards will then be considered unenforceable.

For payment cards, the prohibition applies only if the card charges imposed on merchants are capped (in accordance with the Interchange Fee Regulation). In Germany, this is the case for the most popular cards Girocard, Visa and MasterCard. Exempted from the interchange fee cap are payments with American Express, Diner and other three party-schemes without an intermediary. Payment with these credit cards can still be subject to a fee.

It is currently unclear whether the prohibition also affects payments via third parties such as PayPal, or payments with vouchers and similar forms of store credit. The legislative texts and materials suggest that these should not be covered by the ban. In practice, however, the terms and conditions of most third-party providers already prohibit businesses from surcharging end customers for using their services.

What is to be done?

The legislative change affects all providers dealing with payment questions. Companies selling games directly to consumers should start preparing for the changeover right now. The changes apply to both the sale of games as well as the processing of subsequent payments, for example for in-game content.

Terms and conditions stipulating additional fees must be modified by the cut-off date. Depending on the amount of fees charged so far, the new regulation may also require major adjustments to price calculations. The technical aspects of payment processing, i.e. adjustments to shop systems, should also be addressed at an early stage.

Anyone who still charges fees after the deadline risks costly cease-and-desist letters from competitors and consumer protection watchdogs.

Companies who sell their games exclusively via external online platforms and stores (such as iTunes or Google Play) are normally not required to take action. In these scenarios, the platform providers are required to modify their payment procedures if they currently charge extra fees for certain payment methods.

What else should vendors know?

Our guide on the ramifications for existing market players provides additional information on how the Second Payment Services Directive might affect your business. The revisions include a vast extension of scope, changes regarding the authentication of payments and further amendments to conduct of business rules.

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Konstantin Ewald

Konstantin Ewald

Partner at Osborne Clarke
Konstantin Ewald is a Partner and Head of Digital Business at Osborne Clarke, Germany. He advises leaders in the digital media and software industry throughout Europe and the US on all matters of digital media and IT law as well as IP/technology-related transactions.

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