'ILLEGAL' HANDLING FEES

Brits face even higher bank charges when they go abroad this summer. They will be hit with extra fees for using their debit cards in shops and restaurants and withdrawing cash from ATMs. NatWest is the first to up its charges before the summer holidays by raising fees for overseas debit card deals and cash machine withdrawals from 2.65% to 2.75%. Customers will also pay £1.25, up from 75p, every time they use their debit card to pay bills.

The big banks already rake in £535million a year in hidden charges from holidaymakers but they are determined to compensate for the £12 penalty charge cap imposed by the Office of Fair Trading on missed credit card payments last year. NatWest's parent group, the Royal Bank Of Scotland, made record profits of £9.2billion last year, up from £7.9billion in 2005, while imposing rip-off overdraft charges on customers. The new charges will come into force on June 1, just as the summer holiday season begins.

NatWest defended the increases, saying charges have not gone up since 2001 but consumer watchdog the Independent Banking Advisory Service, said, "It's completely obscene. It does not cost that amount to process these transactions." It emerged that NatWest, Royal Bank Of Scotland and Mint, all part of the RBS group, are to start charging credit card customers £12 if they change their addresses without telling the bank. (Source: Sunday Mirror, Apr/07)

Banks are fleecing shoppers of £1bn a year through 'illegal' handling fees on credit card transactions. The Office of Fair Trading has ruled that the fees imposed on retailers every time they put a credit card through the till are unfair and too high. They are passed on to shoppers through higher prices for anything from a bag of groceries to a restaurant meal. The charging regime, which operates under the MasterCard and Visa credit card systems, is filling the coffers of the big banks, but the OFT is moving to cut the fees in half, which would see bank revenues reduced by an estimated £1bn a year.

It said that it intends to rule that the major banks have broken competition law by imposing 'unduly high fees' on retailers for processing MasterCard transactions. The nature of the charging regime and the scale of the fees are effectively illegal under Article 81 of the European Commission Treaty and the UK's 1998 Competition Act, it said. It is expected to come to the same verdict over Visa.

The ruling could pave the way for a multi-million-pound damages claim against the banks by retailers. Consumer groups and store chiefs are united in their opposition to the high charges. They affect all shoppers whether they use credit cards or not, because stores generally offset the cost by raising prices across their range. Furniture giant IKEA recently became the first major retailer to opt out of this consensus. It is now charging customers who use a card a token 70p fee. The cut-price airline easyJet lists the fee separately as a bank 'fat cat tax' on its website.

The handling fee is charged on average at around 1% of the value of the transaction, although the banks vary the rate depending on the size of the retailer. A large supermarket, because of its high turnover, gets a more favourable rate than a small independent shop. The OFT action follows a complaint from the British Retail Consortium, which represents most of the major High Street names.

The banks which operate the MasterCard scheme have a chance to make representations before the OFT makes its final judgment. BRC communications chief, David Southwell, said, "These fees amount to a massive unfair tax on retailers and shoppers. There is no clear explanation as to why these fees are being charged, why they are set at any particular figure and what retailers get in return. They are a vampiric drain on retailers and consumers." The BRC's lawyers believe there may be scope for a damages claim against the banks.

Southwell said, "This is a key issue for retailers and consumers. The OFT must not let the banks weasel out of this. We need urgent action." MasterCard and its member banks have launched a fierce rearguard action to block any cuts in the fees. They have threatened that banks might recoup lost revenue by imposing annual fees of as much as £30 a year on credit card holders. Another sanction would be to reduce the benefits of reward schemes linked to spending. (Source: Mail on Sunday)

Banks are making £500-million a year charging customers every time they use their debit or credit cards overseas. The charges appear on bank statements as part of a complex calculation converting foreign currency into sterling. That ensures many holidaymakers remain unaware of how much their withdrawals and purchases are really costing. A tourist who uses a debit card to withdraw £200 in cash and buy items worth £1,000 over a two week stay abroad could end up paying up to £81 for the privilege.

Taking money out of a cash machine overseas with a debit card costs up to £4.50 a time. Banks also inflict a charge based on a percentage of the value of each purchase, plus, in some cases, a set fee. The charge is normally 2.75% of the price. However, NatWest has an additional fee of 75p per purchase, while Lloyds TSB charges an extra £1 and the Halifax £1.50. British holidaymakers and travellers spend £20billion a year overseas on debit and credit cards, mostly over the summer months.

This delivers a huge seasonal windfall to the banks. Consumer groups have accused the banks of using small print to con their customers. They are angry that the charges remain unclear to many customers because they are included in a foreign currency conversion. Rather than setting out the fees clearly, the banks use a deliberately lower exchange rate in the calculation to allow them to cream off their charges.

The Nationwide building society is the only major High Street name not to impose such charges. Its calculations show charges imposed on a family making two £100 cash withdrawals and £1,000 of purchases can be massive. They range from £36 with Barclays and £36.50 with HSBC to £58.80 with NatWest, £66 with Lloyds TSB and £81 with the Halifax.

The same pattern of spending with a credit card would generate charges ranging from £3 with Nationwide up to £36 at HSBC, £37 at NatWest, Barclays and Halifax, and £38 at Lloyds TSB. The banks which impose the charges said they regarded them as 'processing' fees. They said details were included on summary boxes printed on card application forms and in the small print on monthly statements. (Source: Mail on Sunday)