An end to non-DD surcharges from 6th April 2013?

NFH

As a result of budget airlines imposing above-cost payment surcharges, the UK has enacted Article 19 of Directive 2011/83/EU on Consumer Rights earlier than required and the legislation will come into force on 6th April 2013. Section 4 of the Consumer Rights (Payment Surcharges) Regulations 2012 states:

A trader must not charge consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of that means.

Does this mean an end to higher prices by gas and electricity suppliers when customers pay by a method other than direct debit (e.g. bank transfer or debit card)?

Wywth

NFH wrote: »

As a result of budget airlines imposing above-cost payment surcharges, the UK has enacted Article 19 of Directive 2011/83/EU on Consumer Rights earlier than required and the legislation will come into force on 6th April 2013. Section 4 of the Consumer Rights (Payment Surcharges) Regulations 2012 states:

A trader must not charge consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of that means.

Does this mean an end to higher prices by gas and electricity suppliers when customers pay by a method other than direct debit (e.g. bank transfer or debit card)?

Which energy supplier do you know that charges fees above and beyond their quoted tariff, let alone in excess of the charges such payment method incurs?

I know some suppliers give a discount for agreeing to pay by direct debit. Perhaps they will need to cut that discount if it represents more than they save

NFH

Wywth wrote: »

Which energy supplier do you know that charges fees above and beyond their quoted tariff, let alone in excess of the charges such payment method incurs?

I know some suppliers give a discount for agreeing to pay by direct debit. Perhaps they will need to cut that discount if it represents more than they save

It's not so much a discount because the DD price is a headline price, just as the non-DD price is. It's clear that the discount/surcharge (whichever way you look at it) is much more than the cost/saving of DD vs non-DD, otherwise the discount/surcharge would be a fixed amount per payment rather than a discount/surcharge on the unit price of the energy consumed.

Wywth

NFH wrote: »

It's not so much a discount because the DD price is a headline price, just as the non-DD price is. It's clear that the discount/surcharge (whichever way you look at it) is much more than the cost/saving of DD vs non-DD, otherwise the discount/surcharge would be a fixed amount per payment rather than a discount/surcharge on the unit price of the energy consumed.

I only know supplier that give a discount for paying by DD.
I'll ask you again, which energy suppliers do you know that charge a surcharge on top of their headline prices for paying by certain methods, and if so does it represent a charge in excess of what it costs them?

Differences in payment methods have to be cost reflective, but there is nothing to prevent a supplier offering competitive tariffs that may require certain payment methods, paperless billing, omline management, etc.

Costs of different payment methods often depend on the value of the payment, so a percentage discount is appropriate rather than the fixed price discount you suggest.

Edit:
And don't forget under Ofgem proposals, any price differences related with payment methods will have to be reflected either in the standing charge or in the unit rate of the core tariffs. In this sense, under their proposed rules direct debit will no longer be a discount.

NFH

Wywth wrote: »

Costs of different payment methods often depend on the value of the payment, so a percentage discount is appropriate rather than the fixed price discount you suggest.

This applies only to payment by credit card. It most definitely does not apply to debit cards, bank transfer or cheques.

SwanJon

Think this has already happened - a while back all the online tariffs were much cheaper than their equivelants now.

I don't know enough to have it "clear that the discount/surcharge (whichever way you look at it) is much more than the cost/saving". Can you share your figures?

MillicentBystander

SwanJon wrote: »

Think this has already happened - a while back all the online tariffs were much cheaper than their equivelants now.

I don't know enough to have it "clear that the discount/surcharge (whichever way you look at it) is much more than the cost/saving". Can you share your figures?

They are but I'm not convinced it is as a result of the discount paying by DD has been sorted to make sure it represents the actual admin savings invloved.

SwanJon

Sorry, that wasn't specifically a DD thing, but more how the relative costs of the tariff were reflected in the price - online tariffs aren't that much cheaper to administer.
As this change was made I imagine any related change (DD etc) would have been made at the same time - no more 'loss leaders'?

I suppose not all costs are directly related to method of payment - for example no reminders with DD.

NFH

I've found the answer. BIS's guidance on the Consumer Protection (Payment Surcharges) Regulations 2012 page 13 states:

"Discounts from the headline price for the use of a particular means of payment (for example for payment by direct debit) are common in certain sectors (for example in the energy sector) and generally popular with traders and consumers. They are generally efficient and the Government has no wish to discourage discounts of this nature. Traders generate cost savings by collecting regular payments by direct debit and the Government believes it is legitimate. If the discount offered for a particular means of payment reflects the cost savings for the trader, and the additional amounts payable by consumers using other means of payment reflect the additional cost borne by the trader for the use of these other means, this would not be in breach of the Regulations or Article 19."

It therefore seems that energy suppliers will in practice have to charge the same energy price for direct debit, standing order and bank transfer. A higher energy price when additional costs are only per payment (as opposed to per unit of energy) would be unjustified and would breach the Regulations.

SwanJon

I've edited the order of the below.

NFH wrote: »

energy suppliers will in practice have to charge the same energy price for direct debit, standing order and bank transfer. [Only] If the discount offered for a particular means of payment reflects the cost savings for the trader

Your point only stands if there is no additional cost to the supplier of other payment methods, but as above costs are not just down to the charges made by the bank.

Wywth

NFH wrote: »

I've found the answer. BIS's guidance on the Consumer Protection (Payment Surcharges) Regulations 2012 page 13 states:

"Discounts from the headline price for the use of a particular means of payment (for example for payment by direct debit) are common in certain sectors (for example in the energy sector) and generally popular with traders and consumers. They are generally efficient and the Government has no wish to discourage discounts of this nature. Traders generate cost savings by collecting regular payments by direct debit and the Government believes it is legitimate. If the discount offered for a particular means of payment reflects the cost savings for the trader, and the additional amounts payable by consumers using other means of payment reflect the additional cost borne by the trader for the use of these other means, this would not be in breach of the Regulations or Article 19."/

But didn't like it so I made up this one instead :cool:

NFH wrote: »

It therefore seems that energy suppliers will in practice have to charge the same energy price for direct debit, standing order and bank transfer. A higher energy price when additional costs are only per payment (as opposed to per unit of energy) would be unjustified and would breach the Regulations.