Payments watchdog mulling greater powers as Visa and Mastercard ‘run rings’ with fee hikes

The UK payments watchdog is mulling whether it should have more powers to take firms such as Visa and Mastercard to court if they refuse to provide information.

The news comes as the regulator faces criticism for not doing enough to clamp down on post-Brexit credit and debit card fees.

The Payments Systems Regulator (PSR) last month proposed an initial “time-limited” cap of 0.2 per cent for UK-European Economic Area (EEA) debit consumer transactions and 0.3 per cent made by credit cards online, with a lasting cap to be established after further analysis.

Fees were previously capped under EU legislation, which was not carried over after Brexit – when prices surged from 0.2 per cent to 1.15 per cent for debit cards and 0.3 per cent to 1.5 per cent for credit cards.

At a Treasury Committee hearing on Tuesday, Labour MP Dame Angela Eagle said customers were “being taken for a ride” by payment firms that hiked their fees.

She said the PSR’s consultation and information gathering process had gone at “quite a snail’s pace”.

Chris Hemsley, managing director of the PSR, told MPs that if the regulator could confirm its initial proposals, it would issue legal directions “probably towards the end of this calendar year, and then businesses would start to benefit from the prices probably in about a year’s time”.

He added: “I think one of the things I would highlight is that when we started to request the information from the firms, what became readily apparent was that they don’t hold information in a way that is readily accessible for us.”

Eagle replied: “Frankly though, they had enough information to hoik their fees in about 24 hours after we came out of the European Union.”

She questioned why the regulator could not impose a temporary price cap “tomorrow”, to which Hemsley replied that the PSR would not be able to “set out the legal instruments to implement that cap” until the summertime.

The regulator is set to make its final proposals in April.

Eagle said payment firms were “running rings around” the PSR and had little incentive to be forthcoming with information on their fees while they can still hike them.

“Frankly, Visa and Mastercard haven’t been used to being regulated this way in the past, and it does take some time to take them on that journey,” Hemsley said.

The PSR last month expressed concern that Visa and Mastercard, which dominate the sector, have likely raised fees to an “unduly high” level, with UK businesses estimated to have paid between £150m and £200m in extra fees in 2022.

“I think you’re talking to me with a very big eye on a very rich lawyer that works for Visa or Mastercard, aren’t you?” Eagle asked Hemsley.

Hemsley noted a “gap” between the powers of the PSR and other regulators and said he had considered proposing reforms so that “when we ask for information, if a party refuses to give us that information, we would take them to court”.

“If they gave us that information on the steps of the court… there is then no consequence,” he added.

Hemsley said he had “spoken to government officials about it” but opted to give the committee written, rather than verbal, answers when asked whether he had formally requested these powers from the Treasury.

Visa and Mastercard have strongly disagreed with the PSR’s proposals, arguing their fees reflect the complexity of UK-EEA transactions and the value provided to UK businesses and consumers in protecting them from fraud.

The government has called for more competition in the payments market as the two firms accounted for around 99 per cent of the combined total of UK debit and credit card payments in 2021.