Survival of independents threatened by EU directive on credit card charges
A new directive preventing companies from passing credit card charges onto consumers threatens the survival of independent travel agents and tour operators, says AITO chairman Derek Moore.
He said many don’t make sufficient profit to absorb the 2% charge levied by the card providers.
And he warned that credit card companies might increase their charges if the move leads to more consumers paying for their holiday with plastic, which will push up holiday costs.
HM Treasury asked the industry for feedback on the planned Second Payment Services Directive, which has been put forward by the EU.
"Consultation on this little gem launched in the first week of February 2017, with an original deadline for responses of March 13," said Moore.
"Happily, on March 9, the deadline was extended generously to March 16, so AITO’s been burning the midnight oil to get its response to the Treasury in time."
Moore said that passing the 2% credit card charges onto consumers was vital to the survival of travel agencies that earn only 10% to 11% commission on sales.
"This directive will seriously affect their livelihoods," he said.
He said the situation was the same for AITO specialist tour operators, many of whom ‘gently discourage’ consumers from paying by credit card, pointing out that they are fully bonded so they don’t need the protection offered by credit card issuers.
"Once the Government’s implicit encouragement to the general public to pay for more of their purchases by credit card is in action, holiday costs will of course go up because tour operators work on such slim margins (pre-tax profits of around 1% to 2% are the norm) that there is simply no way of absorbing such additional costs," added Moore.
"This backward step is, AITO believes, to the definite disadvantage of the holiday-buying public and to consumers generally."
Moore said it was also wrong for the Government to encourage people to pay for holidays ‘on the never-never’.~"Are they trying to help our beleaguered banks by pushing more business their way?" he asked.
He warned that ending credit card charges for consumers was likely to lead to a rise in use, which might lead to higher charges.
"The credit card industry is likely to perceive a higher risk to them with more travel business going their way, meaning that they will probably charge holiday companies even more than they are at present.~
"The impact of this move will mean that every consumer is adversely affected – even those who normally benefit from a lower price when choosing to pay by a debit card or cheque.~
"The public will be by far the loser rather than the beneficiary as a result of this new regulation – the polar opposite, we are sure, of its instigators’ aims."
The Second Payment Services Directive (PSD2) is due to become law in the UK by January 2018.
Linsey McNeill
Editor Linsey McNeill has been writing about travel for more than three decades. Bylines include The Times, Telegraph, Observer, Guardian and Which? plus the South China Morning Post. She also shares insider tips on thetraveljournalist.co.uk
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