THE LAW - If someone charges you a CREDIT CARD processing fee.

[10110001]

Many companies charge you a fee if you choose to pay for goods and services on your credit card. In many cases this is illegal and the company director or trader can get a criminal record.

The basics:

Your credit card is regulated by the Consumer Credit Act 1974, and any transactions you make are also regulated by the Act.

For anyone to charge you a fee to process any regulated credit transaction under the Act, must be licensed by the OFT with a Category C (Credit Brokerage) Consumer Credit License.

The Law:

Section 21 of Part III of the Consumer Credit Act 1974 reads:

21 Businesses needing a licence

(1) Subject to this section, a licence is required to carry on a consumer credit business or consumer hire business.

(2) A local authority does not need a licence to carry on a business.

(3) A body corporate empowered by a public general Act naming it to carry on a business does not need a licence to do so.

Section 39 of Part III of the Consumer Credit Act 1974 reads:

39 Offences against Part III

(1) A person who engages in any activities for which a licence is required when he is not a licensee under a licence covering those activities commits an offence.

(2) A licensee under a standard licence who carries on business under a name not specified in the licence commits an offence.

(3) A person who fails to give the Director or a licensee notice under section 36 within the period required commits an offence.

Many companies, in particular airlines, travel agents hold a Category C credit license specifically to enable them to charge a credit transaction fee.This is bacause their operating profits are usually very low.

To check that a company holds a Category C credit license, call the consumer credit public Register on: 020 7211 8608 and press 1 to search the register.

If they do not have a licensing arrangement, they are committing a criminal offence and you should notify the OFT on 020 7211 8608. You can also revoke the whole transaction and get your money back.

Cardnet, and other card transaction services classify a processing fee as a Prohibited Fee - and Section 21(1) is the reason why. Unless they have written permission from their merchant service provider AND hold a Category C credit license, the seller is liable for these charges in the Merchant Service Agreement that comes with their card transactions terminal.

[vortex]

Am not sure there is a conclusion merely a statement of what the credit consumer act says with regards to charging a fee for processing card transactions. The question is, are any companies in breach of this who are still trading and charging a fee? Is there anything they should display on their website that proves they have a CCL?

[10110001]

Originally Posted by davjoh

Charging the consumer a fee for processing card transactions requires a licence (the OP hasn't explained why or backed this up);

A person charging a fee (or commission) for processing a credit transfer is a credit broker. He is required to have a licencing arrangement with the OFT.

Originally Posted by davjoh

If somone charges you such a fee without a license you can recover the whole transaction (the OP hasn't explained why or backed this up).

If a merchant falsely claims that he can charge a fee for processing a credit money transfer between a lender and a borrower is committing fraud. Its Section 2 of the Fraud Act 2006, and the credit transaction can be revoked under Section 75 of the Consumer Credit Act 1974.

Originally Posted by davjoh

What I am asking the OP to do is say 'you need a Category C licence because OFT Guidance document XYZ states this is a regulated activity and it has been established in court by Nomark vs. Nomark (2002) that this principle is binding'.)

Nomark vs. Nomark. Except for the divorce proceeding of the same name (which does not set any legal precedent anyway) what is this? and can you direct me to the source?

Originally Posted by davjoh

Nomark vs. Nomark I mean no offence to the original poster, and this is in no way intended as any form of attack - I for one would be very happy to see you make a sound argument that makes this idea reasonably pursuable. But without further info you're sending people up a creek without a paddle.

Davjoh

The legislation quoted in my oroginal post already makes it clear. It says:

A person who engages in any activities for which a licence is required when he is not a licensee under a licence covering those activities commits an offence.

This is also reiterated by the OFT. A Category C license enables someone to trade as a licensed credit broker. A credit broker is somebody who can administrate a credit transfer or loan between a lender and borrower, and charge a fee thereto.

[Conniff]

This is a cruel situation and I don't know why traders allow the cc companies to get away with it.
They are charged around 2.4% because they accept cc and this is on top of the fee the card owner is charged. This is one of reason that small businesses don't accept cards as their margins are tight enough without having to pay the card companies a fee as well.
If all the retailers got together and refused to accept cc unless this fee was scrapped, I think the cc companies would have second thoughts.

It is on a par with having to pay a fee to a mobile operator for receiving phone calls like you do now on foreign roaming.

[10110001]

Originally Posted by Conniff

This is a cruel situation and I don't know why traders allow the cc companies to get away with it.

1. The Merchant Service Provider simply doesn't know (or care) their merchants are passing their account charges on to ther consumer

2. The merchant holds a Cat C license - that authorises them to charge the credit borrower a commission when processing a credit transaction between the credit borrower and a credit lender. Many large volume retailers obtain a license for this very purpose. The (straightforward) application fee for a Cat C license is about £250 a year.

Originally Posted by Conniff

They are charged around 2.4% because they accept cc and this is on top of the fee the card owner is charged. This is one of reason that small businesses don't accept cards as their margins are tight enough without having to pay the card companies a fee as well.

The processing fee is charged to the merchant. It's deducted from the monthly return the merchant receives from his merchant service provider for his customers card payments. Those terms are agreed when a merchant signs the Merchant Service Agreement which comes with a card payments terminal.

Originally Posted by Conniff

If all the retailers got together and refused to accept cc unless this fee was scrapped, I think the cc companies would have second thoughts.

Its never been done as far as I know. The charge is shared between the merchant service provider and the underwriting bank - e.g. VISA or Masterard etc.

Originally Posted by Conniff

It is on a par with having to pay a fee to a mobile operator for receiving phone calls like you do now on foreign roaming.

The rules are that the account charges are the responsibility of the merchant. The consuimer is responsible for paying the transaction amount plus any interest.

The merchant service provider will already have their own Category C licensing arrangement. This authorises them to charge a brokerage fee for arranging a credit transfer between a borrower and a merchant.

If the merchant wants to pass that brokerage fee on to the consumer, the merchant must also be licensed as a credit broker.

[Givuzagame]

Can you advise if bailiffs would hold such a license to charge a processing fee?

[10110001]

Yes, most firms of bailiffs hold licenses from Cat A to E. Check by calling 020 7211 8608.

If a bailiff has charged you a credit card transaction fee in the last 6 years while unlicensed, you can reclaim the whole transaction under Section 75 of the Consumer Credit Act 1974 and Section 2 of the Fraud Act 2006.

File a complaint under Section 2 of the Fraud Act and Sections 21(1) and 39(1) of the Consumer Credit Act 1974 with the Office of Fair Trading. phone and they'll send you a complaint form.

You can also file a criminal complaint under Section 39(1) and Section 2 of the Fraud Act with a police authority. Print a hard copy the bailiffs receipt showing the credit transaction processing fee, a copy of the above legislation and hand it into a police station. If the credit card charge was before January 01, 2006 then substitute Section 2 of the Fraud Act 2006 with Section 15(a)(1) of the Theft Act 1968 (amended) obtaining a money transfer by deception.

Bailiffs must also have a Category E license to enable them to trade in debt recovery.

Edit. A Merchant (or bailiff) must have consent of the merchant service provider to pass on account charges to the consumer. By default, the service agreement makes the merchant liable for them. If the merchant does not reveal whether they have this consent - do a chargeback anyway, for failing to cooperate in a transaction dispute.

[10110001]

You are not likely to need a licence (unless you are a credit-reference agency) if:

It doesn't say a license is not needed. However, this comment questions whether or not a broker needs to be licensed. I'll need to refer to the OFT to clarify the legal position. If you are correct, there many traders that will want their criminal convictions for unlicensed brokerage under Section 39(1) to be revoked & could make you their best friend! Can you show me its source?

you are just accepting credit cards or trading checks issued by someone else (and you didn't introduce the borrower to them)

There is nothing in the Consumer Credit Act sets whether the credit broker must, or must not, be the introducer. The Act says they must have a licensing arrangement in place. A Cat C licenses are needed for a person who acts as a credit broker. And a credit broker is someone who acts as a professional intermediary between the lender and the borrower. Can you show me the source of this comment?

Nomark vs. Nomark. Except for the divorce proceeding of the same name (which does not set any legal precedent anyway) what is this? and can you direct me to the source?

I think you missed my point entirely.

Your previous post indicated this set the precedent where an unlicensed credit broker was excluded from liability under Section 39(1) of the Consumer Credit Act. If I missed the point, please clarify for me, or quote your source?

[10110001]

Originally Posted by davjoh

What I am asking the OP to do is say 'you need a Category C licence because OFT Guidance document XYZ states this is a regulated activity and it has been established in court by Nomark vs. Nomark (2002) that this principle is binding'.

Can you show the source of this information. And can you give an explanatory note what impact this case has on a credit broker's statutory requirment under Section 29(1) to hold a Cat C license if they intend to charge a fee to arrange a credit transaction between a lender and a borrower.

Originally Posted by davjoh

The Office of Fair Trading: Businesses requiring a licence - about half-way down the page.

It does not state that a person carrying on business as a credit broker is exempt from needing a license. It says that a trader accepting credit card as a form of payment may be excempt.

[10110001]

Out of curiosity, I have raised your argument to the OFT. I'll post the answer when I get one.

Your website is unclear whether a person or business that charges a fee for arranging a credit transaction between a lender and borrower needs to be licensed as a credit broker (Category C) under Section 21(1) of the Consumer Credit Act.

Can you confirm, yes or no, if a license is required.

A debate is taking place, involving an unlicensed trader who was convicted under Section 39(1) of the Act when he charged a fee for arranging a credit transaction between a consumer’s credit card company and the consumer himself and charged that fee to the consumer credit card account.

The trader has read the following debate, and seeks to enquire whether he has grounds to have his conviction revoked.

THE LAW - If someone charges you a CREDIT CARD processing fee.

Regards,

[robert_harper_2000]

I'm abit confused.
For example IKEA charges you £0.70 for using your credit card - does this mean ( assuming they don't have a licence ) you could technically do a chargeback for the whole transaction?

[10110001]

Back in 2005 the consumer credit public register showed IKEA (North Circular Road) has a Cat C credit license and, therefore can charge a fee to process a regulated credit transaction.

The 70p charge is to offset their transaction costs, and it also persuades the consumer to use a non credit payment method and thus, excludes the merchant from liability under Section 75 of the Consumer Credit Act 1974.

If no Cat C license was held and you revoked the transaction, then you may be obligated to return the goods to the merchant, or you could be accused of defrauding a merchant of his goods.

[Conniff]

Are we talking just 'extended' credit here?

Can you put it into context of the local take-away or corner shop for instance, is he allowed to pass on the charge he gets from the bank for accepting a credit card when you buy No 28 and No 33, or does he need a license ?

[10110001]

Originally Posted by Conniff

Are we talking just 'extended' credit here?

Any credit transaction falling under the remit of the Consumer Credit Act 1974 and amended 2006.

Originally Posted by Conniff

Can you put it into context of the local take-away or corner shop for instance, is he allowed to pass on the charge he gets from the bank for accepting a credit card when you buy No 28 and No 33, or does he need a license ?

Yes, he must have a Cat C license in order to charge a fee to process a regulated credit transaction between a lender and a borrower.

He probably already has one as they easily obtainable from the OFT, but this is more common with travel agents and airlines.

Bailiffs, for example, often have Cat C license but its still a criminal offence to charge this fee because the Bailiffs Act 2000 says: A bailiff shall not charge any costs or fees other than those prescribed.

[Conniff]

I hope I'm not going off topic, but this is interesting.

So what would the rules be regarding the instore cash machines(ATM's)? I notice they charge around £1.50p to use them. Does this come under the same category?